Postpetition transfers: check the authority before accepting estate property

The filing date changes the inquiry

A transfer made after the bankruptcy case begins may raise an avoidance question under section 549. Its general rule addresses transfers of estate property made after commencement that have specified limited authorization or are not authorized by the Code or court. This is distinct from the prepetition preference framework in section 547.

For a recipient, the practical question is what authority supported the transaction. An invoice marked approved, a manager's assurance, or the fact that funds cleared a bank does not necessarily establish bankruptcy authorization. Identify the property and the capacity in which the person giving instructions acted.

Read the whole order

A court order may permit a category of transactions while imposing conditions, limits, or an effective period. Keep the entered order and relevant supporting documents. A proposed order attached to a motion is not the same thing. Nor does authority for one transfer necessarily extend to a related affiliate or later payment.

An illustrative buyer may negotiate an equipment purchase after the filing but close before required approval. The sequence matters. Counsel should examine the agreement, payment, delivery, and actual authorization dates rather than relying on the parties' broad description of the deal as court-approved.

Exceptions are specific

Section 549 contains provisions for certain involuntary-case gap transactions and certain good-faith real-property purchasers. Those rules have conditions and are not a general safe harbor for anyone unaware of the case. The section also has its own limitation period for an action or proceeding.

If a transfer is challenged, separate the avoidance issue from who may be required to return property or value under section 550. Preserve the transaction record and obtain advice on the actual demand. A belief that the debtor needed the transaction does not resolve the statutory questions.

Before a postpetition closing

• Identify the estate property and relevant debtor.
• Locate the applicable statutory or entered court authority.
• Confirm conditions and timing have been satisfied.
• Retain the closing record and evidence of the value exchanged.