As a Chapter 7 Trustee, I have routinely attacked as preferential credit card balance transfers occurring within 90 days of the filing of bankruptcy. The 11th Circuit, in In re Egidi, 2009 WL 1684601 (11th Cir. June 2009) has affirmatively held such transfers to be avoidable preferences in an opinion rendered this past summer.
The argument was that the debtor was not actually making a transfer. It was more in the nature of a "lender to lender" transfer, and did not have a detrimental effect on the Bankrutpcy Estate. The 11th Circuit made fairly short work of the argument, holding that the transfer was subject to the debtors direction and did diminish the estate, and was hence preferential.
What interests me more than the decision is the reaction of the industry to the decision. Since Egidi was released, I've been watching to see if there was a noticeable decline in balance transfers being reported by debtors. This seems to be the case, at least in Chapter 7 cases. Since this past summer, I can't recall a single instance of a debtor reporting a balance transfer within 90 days of filing. It may be a coincidence, but I doubt it. Folks who use credit cards to make balance transfers are on presumptively shaky financial ground, and are candidates for bankruptcy. The industry has probably figured out that allowing a five or six thousand dollar balance transfer to someone in a difficult financial position is unwise. Ya think?
