Payment to Supplier in Exchange for New Value Not Avoidable Preference

A debtor’s pre-petition payments to his supplier are not avoidable preferences under Section 547 if they were given in exchange for “new value” prior to, or contemporaneous with, the supplier’s delivery of the products.

Suppliers with credit-risky buyers should establish payment schedules where goods are paid for either prior to, or contemporaneous with, the delivery of those goods. The contract must contemplate that nothing will be exchanged and no value will be given until the lumber is delivered to the buyer.

Suppliers should avoid credit transactions, by which goods are shipped and the supplier invoices for payment at a later time.