In re Wild Bills, Inc.
United States Bankruptcy Court for the District of Connecticut
206 B.R. 8 (1997)
Wild Bills, Inc. (debtor), which had substantial outstanding loans from its bank Union Trust (creditor) while also keeping deposit accounts there, filed chapter 11 (later converted to chapter 7). Ninety days before the filing, Wild Bills owed Union Trust $1,083,431 more than it held in its Union Trust deposit accounts; two days later, Wild Bills withdrew funds from those accounts, widening the gap to $1,094,674. Union Trust then declared the loans in default and exercised its setoff right against the deposit accounts. The bankruptcy trustee sought to recover from Union Trust under section 553(b), arguing the setoff functioned as an improper payment preference.
Whether, if a creditor exercises a setoff right during the 90-day period before a debtor's bankruptcy filing, the bankruptcy trustee may avoid the setoff to the extent the setoff amount increased during that period.