Voidable Preferences and Protection of the Expectation Interest

Abstract

One of the principal duties of a trustee in bankruptcy is to marshall the unsecured assets of the bankrupt estate, liquidate them, and distribute the proceeds among the estate's unsecured creditors in a statutorily prescribed manner. In performing this duty, the trustee enjoys a number of so-called "avoiding powers," carefully delimited in sections 60, 67 and 70 of the present Federal Bankruptcy Act. These powers enable the trustee to set aside certain pre-petition transfers made by the bankrupt and to recover the transferred assets for the benefit of the bankrupt's unsecured creditors. Among the transfers subject to the trustee's avoiding powers are those involving security interests. Those sections of the Bankruptcy Act that define the trustee's avoiding powers provide the principal forum for determining which pre-bankruptcy security transactions will survive the "acid test" of bankruptcy and which will not.