447 B.R. 546
Bankr. N.D. Ohio2010Background
- Debtor Donald Eckman filed a Chapter 7 petition in the United States Bankruptcy Court for the Northern District of Ohio on November 30, 2009.
- Defendants Richard and Mary Eckman are the Debtor’s parents and are insiders for purposes of §547(b).
- Between November 2008 and the filing, the Debtor made 12 prepetition payments totaling $2,400 to the Defendants to repay a loan used to obtain home furnishings.
- Trustee filed a complaint to avoid these prepetition transfers as preferential under §547(b).
- The matter is a core proceeding under 28 U.S.C. §157(b)(2)(F), and the court may enter final orders on summary judgment.
- The court granted the Trustee’s motion for summary judgment and ordered the Defendants to surrender $2,400 to the estate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 12 transfers are avoidable as preferences under §547(b). | Trustee argues transfers were to insiders, within 1-year window, and benefited the Defendants over other creditors. | Defendants contend the ordinary course defense under §547(c)(2) defeats avoidability. | Yes; transfers are avoidable as preferences. |
| Whether the ordinary course defense under §547(c)(2) applies to the transfers. | N/A | Long-term debt payments may qualify; the defense applies to family members if conditions satisfied. | Not automatic; ordinary course requires debt incurred in ordinary course by both debtor and transferee, which is not shown here. |
| Whether the debt was incurred in the ordinary course of the debtor's and transferee's financial affairs. | N/A | Argues transfers were in ordinary course because it involved a long-term loan payments to a family member. | Debt was not incurred in the ordinary course; the relationship and lack of regular pattern weigh against ordinary course. |
| Whether familial relationship affects the ordinary course defense. | N/A | Family relationship allowed the ordinary course defense for consumer transactions. | Family relationship does not automatically shield; proof of ordinary course required and was not provided. |
| What is the burden of proof on the ordinary course defense in a summary judgment posture. | N/A | Defendants bear burden to prove nonavoidability of transfers under §547(g). | Defendants failed to present affirmative evidence; Trustee entitled to summary judgment. |
Key Cases Cited
- Union Bank v. Wolas, 502 U.S. 151 (1991) (long-term debt payments may qualify for ordinary course)
- In re Fulghum Const. Corp., 872 F.2d 739 (6th Cir. 1989) (ordinary course analysis is a factual, not a precise legal test)
- In re Carled, Inc., 91 F.3d 811 (6th Cir. 1996) (ordinary course requires debt incurred in ordinary course by debtor and transferee)
- In re Speco Corporation, 218 B.R. 390 (Bankr.S.D.Ohio 1998) (ordinary course defense assessed on facts; pattern of dealing)
- In re Wheeling Pittsburgh Steel, 360 B.R. 649 (Bankr.N.D.Ohio 2006) (preferences disfavor normal liquidation)
- Schlant v. Bartolucci (In re Gawronski), 411 B.R. 139 (Bankr.W.D.N.Y.2009) (family relationships require proof of ordinary course)
- Guarino v. Brookfield Tp. Trustees, 980 F.2d 399 (6th Cir.1992) (affirmative evidence required to defeat summary judgment)
- In re Winn, 127 B.R. 697 (Bankr.N.D.Fla.1991) (support for ordinary course considerations)