Jefferson Bank v. Devault Manufacturing Co. (In re Devault Manufacturing Co.)

OPINION

EMIL F. GOLDHABER, Bankruptcy Judge:

The issue at bench is whether the creation and perfection of the creditor’s security interest shortly before the debtor filed a petition for an arrangement under chapter XI of the Bankruptcy Act (“the Act”) was a voidable preference under § 60 of the Act. We conclude that that security interest was not a voidable preference because the creditors’ committee (and debtor) have failed to establish that the creditor had reasonable cause to believe that the debtor was insolvent at the time the security interest was created and perfected.

The facts of the…