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

Citation:
No. 10-6021 (8th Cir. BAP Jan. 14, 2011)
Tag(s):
Ruling:
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.
Facts:
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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