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Understanding the Deprizio Doctrine in Bankruptcy Law
Definition & Meaning
The Deprizio Doctrine is a principle in bankruptcy law that states if a debtor makes a payment to an outside creditor more than 90 days before filing for bankruptcy, that payment can be reversed if it benefits an insider creditor, such as a partner or family member. This doctrine originated from the case Levit v. Ingersoll Rand Fin. Corp. (In Re Deprizio), where the court determined that payments made to outside creditors could still be subject to a one-year recovery period if they ultimately benefited insiders.
Table of content
Legal Use & context
The Deprizio Doctrine is primarily used in bankruptcy proceedings. It is relevant in situations where a debtor has made payments to creditors shortly before filing for bankruptcy. Legal practitioners often assess these payments to determine if they can be classified as preferential transfers, which can be reclaimed by the bankruptcy estate. This principle is significant for both creditors and debtors in understanding their rights and obligations during bankruptcy proceedings.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A business owner pays off a loan to an outside creditor 80 days before filing for bankruptcy. If this payment also benefits a family member who guaranteed the loan, the payment could be considered voidable under the Deprizio Doctrine.
Example 2: A debtor pays a supplier for goods received 100 days before filing for bankruptcy. If the payment indirectly benefits an insider, such as a partner, it may be subject to recovery under this doctrine. (hypothetical example)
Relevant laws & statutes
The primary statute relevant to the Deprizio Doctrine is 11 U.S.C. § 547, which outlines the rules for preferential transfers in bankruptcy. The case law established in Levit v. Ingersoll Rand Fin. Corp. is also crucial for understanding how this doctrine is applied in practice.
Comparison with related terms
Term
Definition
Difference
Preferential Transfer
A payment made by a debtor to a creditor that gives the creditor more than they would receive in bankruptcy.
The Deprizio Doctrine specifically addresses payments benefiting insiders.
Insider
A person or entity with a close relationship to the debtor, such as family members or business partners.
The Deprizio Doctrine focuses on how payments to outside creditors can affect insiders.
Common misunderstandings
What to do if this term applies to you
If you are considering filing for bankruptcy and have made payments to creditors, it is important to consult with a legal professional. They can help you assess whether those payments could be subject to recovery under the Deprizio Doctrine. Additionally, users can explore US Legal Forms for templates and resources to assist with bankruptcy filings and related legal matters.
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