Antecedent Debt

Antecedent Debt

A legally enforceable obligation, which has been in existence prior to the time in question, to reimburse another with money or property.

Principles of contract law vary from jurisdiction to jurisdiction regarding whether an antecedent debt constitutes good consideration since the debtor does not incur any new detriment at the time that he or she enters a contract with another party. Commercial Paper that has been given in exchange for an antecedent debt is deemed by the Uniform Commercial Code to be supported by adequate consideration.

Under statutes governing Bankruptcy, a transfer of property made by a debtor because of an antecedent debt might be considered a Voidable preference, depending upon the length of time between the creation of the debt and the filing of the petition for bankruptcy. A bankruptcy court may set aside a voidable preference since it gives one creditor a better right to payment than other creditors who are similarly situated.

References in periodicals archive ?
To avoid a broker's payments to such customers, the Trustee must prove that the customer has forfeited customer status because he essentially knew that, instead of depositing cash with his broker for the purpose of buying securities, he was investing in a fraud and therefore the antecedent debt discharged by the broker's payments was invalid.
Section 548 specifies in part that satisfaction of antecedent debt constitutes reasonably equivalent value.
which is not recoverable because they are not made on account of an antecedent debt.
Section 32 of the Model Act defines a "preference" as "a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made within one year before the filing of a successful petition for liquidation under this Act, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive.
At the time such an option is granted, the grant is not "on account of an antecedent debt," and therefore may not be considered a preference.
The reduction of antecedent debt will assist us in working with acquisition candidates who are interested in merging into a public vehicle.
It is then in consideration for an antecedent debt (incurred more than 10 days before the perfection of the mortgage) and would be an unlawful preference in the borrower's bankruptcy if the other elements of a preference were proved.
The law of New York and the majority of jurisdictions that have addressed the issue is that a transfer on account of an antecedent debt is not valuable consideration: "|a~ pre-existing debt is not valuable consideration within the meaning of the recording act.
Transfers between family members for allegedly antecedent debt.
It's therefore important to keep in mind that preference exposure only arises with respect to payments of unsecured antecedent debts.