## Facts

- A corporate debtor owed Barnhill an antecedent debt and delivered a check to Barnhill on November 18 in New Mexico.
- The drawee bank honored the check on November 20, which was the 90th day before the debtor filed a Chapter 11 petition.
- The Chapter 11 trustee sought to avoid and recover the payment as a preferential transfer under 11 U.S.C. § 547(b).
- The dispute turned on when the “transfer” occurred for a payment made by check: at delivery or at honor.
- The bankruptcy court and district court treated the transfer as occurring on receipt/delivery and denied avoidance.
- The Tenth Circuit reversed, adopting a date-of-honor rule for § 547(b), and the Supreme Court granted review.

## Issues

1. For purposes of 11 U.S.C. § 547(b), does a transfer made by check occur on the date the debtor delivers the check to the creditor or on the date the drawee bank honors the check?

## Decision

- The Supreme Court affirmed the Tenth Circuit.
- For § 547(b), a transfer made by check is deemed to occur on the date the check is honored by the drawee bank.
- Because the bank honored the check on November 20 (the 90th day prepetition), the payment fell within the preference period, subject to avoidance if the remaining statutory elements were satisfied.

## Legal Principles

- What constitutes a “transfer” and when it is complete under the Bankruptcy Code is a question of federal law.
- A check does not itself transfer the debtor’s bank-account funds; before honor, the payee has no right in the funds held in the debtor’s account.
- The relevant property interest is the debtor’s claim against the bank (the account balance), and no transfer of that interest occurs until honor, when the bank debits the account.
- Delivery of a check creates, at most, a contingent right to payment; the debtor retains control over the account (including the ability to stop payment) until the bank honors the check.
- Measuring the transfer date by honor aligns preference analysis with when the debtor’s estate is actually diminished.

## Conclusion

The Court held that, for preference avoidance under 11 U.S.C. § 547(b), a payment by check is transferred when the bank honors the check, not when the check is delivered, placing this transaction within the 90-day reach-back period.


Barnhill v. Johnson, 503 U.S. 393 (1992)