Lovett v. Homrich Inc. (In Re Philip Services Corp.)
359 B.R. 616 | United States Bankruptcy Court, S.D. Texas | 2006
What This Case Means for Subcontractors
A bankruptcy trustee tried to recover a $936,741 wire transfer paid to subcontractor Homrich before the company filed for bankruptcy, claiming it was an unfair preference payment. The court ruled against the trustee because the payment was a contemporaneous exchange—the subcontractor released its lien rights in exchange for the payment, making it legitimate new value. This protects subcontractors who negotiate lien waivers in exchange for payment.
Key Takeaways
- •Lien waivers tied to payment create a legal shield against preference claims in bankruptcy. Document that the waiver and payment happened together.
- •A bankruptcy trustee cannot recover payments made in exchange for releasing lien rights, even if the company later files for bankruptcy.
- •Get written confirmation that lien rights are being released at the same time payment is made. This contemporaneous exchange is your best protection.
Wire transfer was intended and in fact a substantially contemporaneous exchange for new value.
Frequently Asked Question
Can a bankruptcy trustee take back money I was paid if the contractor files for bankruptcy?
Not if you released your lien rights at the same time you received payment. The court treats this as a fair trade of new value, not a preference. Always get a written lien waiver signed when you cash the check to protect yourself.
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