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The Court determined that Appellant’s arguments that its ruling would result in unequal treatment of creditors to be unavailing, as in the first instance, “inequality per se is not to be avoided [in bankruptcy]; indeed, reasoned and justified inequality sometimes prevails, usually based on what is in the best interest of the estate.” The new value defense was not enacted to ensure equitable treatment of creditors, the Court found, but to encourage creditors to deal with troubled businesses.Similarly, § 547 was designed to provide equal distribution among similarly situated creditors, not so that all creditors will be treated equally.
Pursuant to §§ 3 of the Bankruptcy Code, Kiwi assumed these three agreements.
The case’s chapter 7 trustee filed adversary proceedings against Port Authority, Sabre and CIT.
The Court of Appeals rejected the argument, holding that policy underlying § 547(b) is not total equality of creditors, but rather equality amongst similarly situated creditors.
Each of the creditors was entitled to unique rights in accordance with §§ 3.
1989) (“”), specifically its language reading “the debtor must not have fully compensated the creditor for the “new value” as of the date that it filed its bankruptcy petition.” The Bankruptcy Court found NYC Shoes to be controlling, and, therefore, held that since the otherwise unavoidable transfer was made after the Petition Date, Appellant was not entitled to recover on its preference claim.
The District Court affirmed the Bankruptcy Court’s decision.
Bankruptcy Judge Sontchi granted Appelle summary judgment, holding that because the Debtor’s payments made pursuant to the Wage Order occurred after the Petition Date, these payments could not enter into the preference calculation.
Judge Sontchi based this holding on his reading of In re New York City Shoes, Inc., 880 F.2d 679 (3d Cir.
Therefore, the defendants are subject to a different standard than those creditors without the same statutory protections.