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 ?
For example, requiring the same customer to pay cash in advance will take the payment outside of the scope of the trustee's avoidance powers altogether, since such payment will not have been made "for or on account of an antecedent debt.
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.
does not recognize a fraudulent transfer claim based upon the repayment of valid, antecedent debt to an unrelated lender; we need note only that UCIC had no antecedent debt to defendants and, therefore, the cases relied upon by defendants are inapposite.
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.
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.
Transfers between family members for allegedly antecedent debt.
Bankruptcy Code Section 547(b)(2), which states that the payment must have been "for or on account of an antecedent debt owed by the debtor before such transfer was made.
Still, some avoided the surcharge simply because the actual terms of the settlement remained a mystery to them, and left some wondering whether the fee can be charged only up front, or for antecedent debt.
For instance, if the insolvent debtor paid a vendor $300,000 during the preference period on account of an antecedent debt, and the vendor thereafter shipped the debtor $250,000 worth of goods, the vendor could, in certain situations, assert a new value defense of $250,000, thereby reducing its maximum preference exposure net of new value to $50,000.
The plaintiff has not looked to see what antecedent debt was the basis for the transfer and may be suing to recover transfers made when the debtor was solvent.