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86 Ohio St. L.J. Online 1 (2025)

handle is hein.journals/furth86 and id is 1 raw text is: The Forest and the Trees of Preferential Transfers BROOK E. GOTBERG* A bankrupt debtor may claw back payments made to creditors in the ninety days before the bankruptcy filing so-called preferential transfers. The power to do so arises from closely drafted and highly technical statutory text, which subjects some transactions to claw back and not others. Scholars have long debated the reasons for the scope and limitations of preference law and have frequently proposed to expand or contract its coverage. One recent proposal would read the statutory text to exclude payments made to a creditor by check or wire transfer from preference liability. This reading interprets the Bankruptcy Code to limit preference liability to recipients of the debtor's property; in bank and wire transfers, the creditor technically receives the bank's property in the transaction. But even if this proposal's basic premises are accepted, the Code should still hold creditors paid by check or wire transfer liable for preferential transfers on a complete reading of the relevant statutory text and its underlying policy justifications. TABLE OF CONTENTS I. INTRODUCTION ...................................................................................1 II. BANK TRANSFERS AND SETOFF RIGHTS..............................................3 III. ENTITIES FOR WHOSE BENEFIT THE TRANSFER WAS MADE...............6 IV. THE POLICY GOALS OF PREFERENTIAL TRANSFERS ............................9 V. CONCLUSION.....................................................................................11 I. INTRODUCTION Every discipline and every viewpoint within it can benefit from a periodic change in perspective. Having to reconsider previously held beliefs from a different angle may clarify where one's understanding is flawed or incomplete. The experience may lead to a change in opinion or simply point to places where misunderstanding must be corrected. Professor Steven Schwarcz's article on the interaction between commercial law and bankruptcy law in the context of avoidable preferences provides just this sort of welcome perspective shift for those who study bankruptcy. He questions whether a law that permits the recovery of any transfer of an interest of the debtor in property1 should encompass transactions made through a bank intermediary. Given current *Professor of Law, Brigham Young University Law School. Much thanks to Wilson Freyermuth, David Skeel, and Richard Squire for their comments on earlier drafts. 111 U.S.C. § 547(b) (emphasis added).

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