First Impressions: The Eleventh Circuit Examines 20-Day Administrative Expense Claims and the Subsequent New Value Preference Defense

Summary

This article discusses a recent decision on whether a creditor's Section 503(b)(9) administrative expense claims can offset preference liability under the subsequent new value defense. The Bankruptcy Code confers administrative expense priority status on the claims of vendors for the value of goods that are shipped in the ordinary course of business and received by a debtor within 20 days of filing for bankruptcy. It also provides vendors and other creditors with various defenses to the avoidance of preferential payments received from the debtor during anywhere from 90 days to 1 year before filing for bankruptcy, depending upon whether the creditor is an insider of the debtor.