New COVID-19 Relief Package Provides Some Preference Relief

As most know, the second COVID-19 relief package included another round of stimulus checks, an extension of the eviction moratorium, and expanded unemployment benefits. However, what you may not realize is that the new law also impacted many federal laws, including the Bankruptcy Code. Of particular importance, the second COVID-19 relief package reduced preference exposure for suppliers of goods and services and commercial landlords, at least temporarily, through a change to 11 U.S.C. § 547 ("Section 547").

A preference action is an action brought by the trustee of a bankruptcy estate pursuant to Section 547 to recover payments of antecedent debt made by the debtor to a creditor in the 90-day period (or longer with respect to "insiders" of the debtor) before the debtor filed for bankruptcy to the extent that such payments provided the creditor with an advantage vis-à-vis other creditors. The purpose of Section 547 is to ensure that a debtor did not favor one