Bankruptcy Trustee Seeks Payment Recovery From CTA Under 'Preference' Claim
The court trustee for liquidated supplier Wynit Distribution is going after CTA to recover a $33,000 debt the association collected from the company a month before it went bankrupt. She alleges the payment qualifies as an improper “preference” action under Section 547 of the federal bankruptcy code and should be voided.
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Wynit paid CTA the money it owed in August 2017 from a Wells Fargo account, said trustee Nauni Manty in an “adversary proceeding” complaint (in Pacer) Thursday in U.S. Bankruptcy Court in Minneapolis. Wynit filed a chapter 11 bankruptcy petition the following month, but the case was converted to a chapter 7 liquidation in January 2018, it said.
The $33,000 owed to defendant CTA was for goods and services it provided to debtor Wynit, the complaint said. “Unsecured creditors of the debtor are not expected to recover 100% of their claims in a chapter 7 bankruptcy of the debtor.” The payment put CTA in an advantageous position, resulting in "a dollar-for-dollar reduction of the debt the debtor owed to the defendant, which is a better result than defendant would have realized as part of a chapter 7 distribution had the payment not been made,” it said.
That qualified the transfer of money as a voidable preference action under the bankruptcy code because Wynit made the payment to CTA on preexisting “antecedent debt,” and did so within 90 days before its chapter 11 filing, when it was “insolvent,” said the trustee. She urged the court to void the transfer and order the funds returned to Wynit’s “estate.” She “reserves the right to supplement her request for recovery” of additional money if she goes through the Wynit books and finds more payments were made to CTA, said the complaint
It isn't clear what goods or services CTA as the trade association that produces CES would have provided and for what purposes to product distributor Wynit, whose still-active website (its phones are disconnected) lists dozens of “recognizable top brands” it once supplied to independent retailers. A CTA spokesperson declined comment Friday.
The $33,000 debt Wynit owed CTA was minuscule compared with the claims of top creditors listed in Wynit’s chapter 11 petition (in Pacer). It shows Wynit owed Fitbit $31.5 million when the petition was filed 19 months ago. Other notables on the top 20: Symantec (owed $9.3 million); Canon USA ($6.4 million); McAfee ($3.5 million); Western Digital ($2.3 million); and Amazon Fulfillment Services ($1.7 million).