## Facts

- On December 11, 2005, debtor Tracy Carpenter agreed to purchase a pickup truck from his sister, Jana Lang.
- Carpenter and Lang signed a written purchase agreement at Lang’s residence on December 11, providing (1) Carpenter would take delivery that day and (2) Lang would retain a security interest in the truck to secure payment of the purchase price.
- Carpenter did not drive the truck away on December 11 because he could not then afford insurance; with Lang’s agreement, the truck remained in Lang’s garage.
- Carpenter obtained insurance on December 19, 2005.
- Due to complications, Carpenter did not physically retrieve the truck until January 4, 2006.
- On January 31, 2006, Lang’s security interest was perfected when her lien was noted on the truck’s certificate of title under Idaho law.
- Carpenter filed a Chapter 7 petition on July 27, 2006.
- The Chapter 7 trustee, R. Sam Hopkins, filed an adversary proceeding seeking to avoid Lang’s lien as a preferential transfer under 11 U.S.C. § 547(b) and to preserve the avoided lien for the estate.
- At trial, Carpenter and Lang testified that Carpenter could have picked up the truck at any time beginning December 11.

## Issues

1. Whether the January 31, 2006 perfection of Lang’s security interest in Carpenter’s truck was an avoidable preferential transfer under 11 U.S.C. § 547(b), including the timing element applicable to an insider.
2. If the transfer was preferential, whether Lang proved the purchase-money (“enabling loan”) defense under 11 U.S.C. § 547(c)(3) by showing the lien was perfected within 30 days after the debtor “receives possession” of the truck.

## Decision

- The court held that the trustee established the elements of an avoidable preference under § 547(b) based on the lien transfer date being the date of perfection.
- The court held that the relevant look-back period was satisfied because Lang, as the debtor’s sister, was an insider and the perfection occurred within one year before the petition date.
- The court held that § 547(c)(3) did not protect Lang’s lien because Carpenter “received possession” of the truck no later than December 11, 2005, and the lien was not perfected within 30 days after that date.
- Judgment was entered for the trustee avoiding Lang’s security interest, and the avoided lien was preserved for the benefit of the bankruptcy estate.

## Legal Principles

- A trustee may avoid a transfer of an interest of the debtor in property that meets § 547(b)’s requirements, including that the transfer occurred within the statutory look-back period; transfers to insiders may be avoided if made between 90 days and one year before the petition date.
- For preference purposes, the “transfer” of a security interest is generally treated as made when the interest is perfected (i.e., when it becomes effective against third parties); if perfection occurs more than 30 days after the security interest is granted, the transfer is treated as made at perfection.
- The trustee bears the burden to prove the elements of § 547(b); the creditor bears the burden to prove any § 547(c) exception.
- The § 547(c)(3) purchase-money exception protects a security interest that secures purchase-money value only if it is perfected on or before 30 days after the debtor receives possession of the property.
- For § 547(c)(3), “receives possession” is not limited to later physical pickup when the buyer already has the present right to take the vehicle and exercise control; leaving the vehicle with the seller for the buyer’s convenience does not extend the 30-day perfection period.

## Conclusion

In *In re Carpenter*, the bankruptcy court avoided the debtor’s transfer of a truck lien to his sister because the lien was perfected within one year of the bankruptcy filing and met the requirements of an insider preference under § 547(b). The court rejected the § 547(c)(3) defense, concluding the debtor “received possession” no later than the contract date—when he had the right to take the truck—so perfection by title notation more than 30 days later was untimely and the lien was avoidable and preserved for the estate.


In re Carpenter, 378 B.R. 274 (2007)