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  1. Bankruptcy Glossary
  2. Post Petition Transfer

What is a Post Petition Transfer?

The United States Bankruptcy Code (under Section 549) prohibits the transfer of a debtor's property which is made after the start of the bankruptcy case or the filing of the bankruptcy petition and is not part of the debtor's normal course of business. All business of the debtor is under the supervision of the bankruptcy court and transactions must be evaluated by the bankruptcy court to determine if they are in the best interest of all creditors or affect all of the creditors' interest.

Post bankruptcy petition transactions

  • placing liens against the debtor's property
  • a major change in the business processes a debtor uses with a vendor
  • a payment to a creditor after the bankruptcy petition is filed for an obligation that originated prior to filing the bankruptcy petition.
  • A bankruptcy lawyer should be consulted for managing the details of transactions after the bankruptcy petition has been filed.

Clients who are doing business with debtors who have filed bankruptcy must be careful that no transfer which is considered out of the ordinary is done without the bankruptcy court's approval. There are instances when a bankruptcy court may allow a post petition transfer such as allowing a transfer from the debtor which the court has determined will not diminish the debtor's estate and may, in fact, improve the estate.