Lange v. Inova Capital Funding, LLC, et al. (In re: Qualia Clinical Service, Inc.)

No. 10-6021 (8th Cir. BAP Jan. 14, 2011)
Affirm decision of Bankruptcy Court avoiding security interest as a preferential transfer. BAP ruled that where a contract for the "purchase" of receivables provides for full recourse to the purchasing entity with respect to the collectability of the receivables, the contract constitutes a financing agreement as a matter of law.
Procedural context:
Appeal from decision of Bankruptcy Court granting summary judgement in favor of Trustee's motion to avoid security interest as preferential transfer pursuant to Bankruptcy Code section 547.
Debtor and creditor entered into an agreement that was labeled a "purchase agreement" for the Debtor's accounts receivable. The contract provided for full recourse to the extent that the receivables proved uncollectable. Creditor attempted to perfect a security interest in the receivables through the filing of a UCC financing statement, but originally filed the financing statement in the wrong state. Within 90 days of the filing of the Debtor's bankruptcy petition, creditor filed a UCC financing statement in the correct state, but the Court ruled that the perfection of the security interest within 90 days of the bankruptcy petition could be avoided as a preferential transfer pursuant to Bankruptcy Code section 547.

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