Inadequate Shorthand: The Circuit Courts are Split as to whether there is a“Remains Unpaid” Requirement in the New Value Exception to Preference Liability

This article addresses the split in the courts over the meaning of the “new value” exception in section 547c)(4) of the Bankruptcy
Code (the “New Value Exception”). Under one line of cases, the amount of a preference claim is reduced by the amount of new
value not secured by an otherwise unavoidable security interest or on account of which the debtor did not make an otherwise
unavoidable transfer for the creditor's benefit. Another line of cases, however, have injected a further limitation not found in
the text of the statute. Under those cases, the New Value Exception is available only to the extent that the new value “remains
unpaid.”

Travis Powers authored this Norton Journal of Bankruptcy Law and Practice article; read the full publication here.