Liberty Mutual Insurance Co. v. New York (In re Citron)
United States Bankruptcy Court for the Eastern District of New York
428 B.R. 562 (2010)
- Written by Abby Roughton, JD
Facts
Jeffrey and Lynn Citron (debtors) were charged with defrauding Liberty Mutual Insurance Company (Liberty Mutual). Jeffrey pleaded guilty to five felony counts and was sentenced to imprisonment plus a $75,000 fine imposed by New York State (the state). Lynn pleaded guilty to a misdemeanor and was sentenced to three years’ probation. Lynn also agreed to pay $5,000 to the state by her sentencing date and $4,722 per month to the state throughout her probation period. On the Citrons’ December 2007 sentencing date, Lynn paid the $5,000. Lynn did not make her monthly payments in January and February 2008 but paid $9,000 on March 25, 2008. Jeffrey also paid his entire $75,000 fine on March 25, 2008. Two days later, the Citrons filed for Chapter 13 bankruptcy. Liberty Mutual, as fiduciary for the bankruptcy estate, sought to recover the Citrons’ March 2008 payments to the state as preferences. Lynn’s original $5,000 payment fell outside the window for recovery. The state conceded that the Citrons’ fine payments satisfied the statutory elements of preferences under 11 U.S.C. § 547 but asserted that the payments fell within the § 547(c)(1) preference exception for payments that constitute a contemporaneous exchange for new value.
Rule of Law
Issue
Holding and Reasoning (Trust, J.)
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