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The Net-Benefit Rule

Learn about the net-benefit rule that governs the amount of an avoidable preference in the context of inventory or accounts receivable securing a claim.


In other lessons, we learned that the Bankruptcy Code generally empowers the trustee or debtor-in-possession to avoid and recover, for the estate, certain prebankruptcy transfers to creditors. These transfers are called preferences. If a transfer to a creditor satisfies the general elements of a preference, it's avoidable, except insofar as the creditor has a defense to avoidance. In this lesson, we'll talk about one very helpful and, indeed, sensible defense to preference avoidance. We'll...