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 ?
While BidRX and Fiscal objected to the circuit court's determination on multiple grounds, we agree with their contention that the evidence was insufficient to prove fraudulent transfer under 242.05(2) because no evidence was introduced showing that the allegedly fraudulent transfers were made to satisfy an antecedent debt. Because this is a statutory element the Becks must prove, the judgment must be reversed.
If payments are made in advance, they are not on account of an "antecedent debt," which is a prerequisite to a preference claim.
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." Similarly, requiring the customer to pay cash on delivery will trigger application of the contemporaneous exchange defense.
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.
First, when payment is slow, try to convert the customer to payment in advance or C.O.D., 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."
Under 547 of the Bankruptcy Code, a trustee may avoid a transfer of the property of the debtor's estate if (1) it was made to or for the benefit of a creditor; (2) it was on account of an antecedent debt; (3) it was made while the debtor was insolvent (a debtor is presumed to be insolvent within 90 days preceding the bankruptcy); (4) it was made on or within 90 days before the filing of the petition for bankruptcy (or one year if the creditor is an insider); and (5) the creditor would receive more than it would in a Chapter 7 liquidation proceeding if the transfer had not been made.
* Transfers between family members for allegedly antecedent debt.
(a) a corporation which, while insolvent, and within four months of the commencement of a receivership action by or against it, transfers any property to or for the benefit of a creditor for or on account of an antecedent debt; and