On Proof of Preferential Effect

46 Pages Posted: 12 Dec 2003 Last revised: 4 Sep 2012

See all articles by Rafael I. Pardo

Rafael I. Pardo

Washington University in St. Louis - School of Law

Date Written: September 4, 2012


This Article presents a comprehensive analysis of the manner in which the trustee of a debtor's estate may satisfy his burden of proof to demonstrate the preferential effect of a prebankruptcy transfer from a debtor to a creditor. The proposed framework, if adhered to by courts, will create a uniformity that gives preference law its proper reach and thereby reinforces its primary goal: equal treatment of similarly situated creditors (the equality principle). After examining the historical developments that have made a trustee's evidentiary burden administratively less complex, the Article discusses the Ninth Circuit's decision in Batlan v. TransAmerica Commercial Finance Corp. (In re Smith's Home Furnishings, Inc.) to illustrate how a court impairs the avoidance of preferential transfers when it creates a rule that improperly construes a trustee's evidentiary burden. The Article rejects the court's rule on the basis that it neither comports with the Bankruptcy Code's test for preferential effect nor with the evolution of the trustee's burden of proof. The Article concludes that, although the ultimate burden of proof rests on the trustee as he presents his prima facie case for preference avoidance, courts must give effect to state law presumptions in favor of the trustee. Failure to do so gives certain creditors procedural advantages, and possibly substantive advantages, to which they would otherwise not be entitled, thus compromising the equality principle.

Keywords: bankruptcy, preferences, trustee, burden of proof

Suggested Citation

Pardo, Rafael I., On Proof of Preferential Effect (September 4, 2012). Alabama Law Review, Vol. 55, No. 2, 2004 , Tulane Public Law Research Paper No. 04-07, Available at SSRN: https://ssrn.com/abstract=470981 or http://dx.doi.org/10.2139/ssrn.470981

Rafael I. Pardo (Contact Author)

Washington University in St. Louis - School of Law ( email )

Anheuser-Busch Hall 585
1 Brookings Drive, Campus Box 1120
St. Louis, MO 63130
United States

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