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Home / Case News / Clawback / To Assure the Effectuation Under Section 502 (d), the Claim May be Disallowed Temporarily and Subject to Reconsideration

To Assure the Effectuation Under Section 502 (d), the Claim May be Disallowed Temporarily and Subject to Reconsideration

December 17, 2018. AlaskaDebtor Jessica Giroux, objected to proof of claim under 11 U.S.C. § 502(d), alleging that certain pre-petition payments made to the claimants, Philip, and Rebekah Johnston, constituted fraudulent and preferential transfers that have not been repaid. Brad Giroux (Jessica’s husband) and co-claimant Philip Johnston were partners in Alaska Fishing Adventures, LLC (AFA), operating a fishing lodge on the Nushagak River in Alaska. Their business relationship soured as Johnston came to believe Brad was mismanaging the business. Philip and his wife, Rebekah (who also worked for AFA), sued Brad and Jessica for various business-related infractions. The Johnstons obtained a state court judgment against the Girouxes.

On March 7, 2018, Jessica commenced the Chapter 13 bankruptcy case. On May 1, 2018, the Johnstons filed a claim in the unsecured amount of $102,282.06. An accounting attached to the claim reflected multiple payments received by the Johnstons pre-petition. On July 26, 2018, Jessica filed her objection to the claim (Objection). She asserted that her pre-petition payments to the Johnstons constituted preferential and fraudulent transfers avoidable under §§ 547 and 548, and recoverable under § 550. Jessica asserted that the payments made to the Johnstons on their state court judgment via cashier’s checks, pre-petition were preferential.

The Court found that the Debtor established all of the elements of an avoidable preferential transfer under 11 U.S.C.S. § 547(b) for purposes of disallowing creditors’ claim under 11 U.S.C.S. § 502(d), including that the pre-petition transfers enabled them to receive more than they would have received if the case were pending under Chapter 7. The Court also concluded that the Debtor failed to establish that the transfers were constructively fraudulent for purposes of 11 U.S.C.S. § 548(a)(1)(B), as she did not show that she did not receive reasonably equivalent value for the transfers or that she was insolvent at the time the transfers were made.

Accordingly, the Court concluded that the Johnstons received pre-petition monetary transfers from Jessica, and those transfers were preferential under § 547. Further, the Court held that since Johnstons’ received preferential transfers avoidable under §550 which had not been repaid, the proof of claim should be disallowed. The Court temporarily disallowed the claim and held that it may be reinstated upon the filing of evidence demonstrating that the Johnstons had repaid the amounts owed to Jessica on account of the preferential transfers they received pre-petition.

In re Giroux, No. 18-00071-GS, 2018 Bankr. LEXIS 3984 (Bankr. D. Alaska Dec. 17, 2018)