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Transfers in the Ordinary Course of Business

Learn about the rule that a transfer may not be avoidable, even though it is a preference, if it arose in the ordinary course of the debtor's and the transferee's business or financial affairs.


As we've learned, the Bankruptcy Code empowers the trustee or debtor-in-possession to avoid certain prepetition transfers from the debtor to creditors, called preferences. If a transfer satisfies the general elements of a preference, then it's avoidable, except insofar as the creditor has a defense to preference avoidance. One defense, which we'll discuss here, is that for transfers in payment of debts incurred in the ordinary course of business. We'll call this rule the ordinary-course...