Page:United States Reports 502 OCT. TERM 1991.pdf/319

 502us1$13Z 08-21-96 15:26:37 PAGES OPINPGT

Cite as: 502 U. S. 151 (1991)

161

Opinion of the Court

the distribution of the assets of the bankrupt estate. The purpose of the preference section is two-fold. First, by permitting the trustee to avoid prebankruptcy transfers that occur within a short period before bankruptcy, creditors are discouraged from racing to the courthouse to dismember the debtor during his slide into bankruptcy. The protection thus afforded the debtor often enables him to work his way out of a difficult financial situation through cooperation with all of his creditors. Second, and more important, the preference provisions facilitate the prime bankruptcy policy of equality of distribution among creditors of the debtor. Any creditor that received a greater payment than others of his class is required to disgorge so that all may share equally. The operation of the preference section to deter ‘the race of diligence’ of creditors to dismember the debtor before bankruptcy furthers the second goal of the preference section—that of equality of distribution.” Id., at 177–178. As this comment demonstrates, the two policies are not entirely independent. On the one hand, any exception for a payment on account of an antecedent debt tends to favor the payee over other creditors and therefore may conflict with the policy of equal treatment. On the other hand, the ordinary course of business exception may benefit all creditors by deterring the “race to the courthouse” and enabling the struggling debtor to continue operating its business. Respondent places primary emphasis, as did the Court of Appeals, on the interest in equal distribution. See In re CHG Int’l, 897 F. 2d, at 1483–1485. When a debtor is insolvent, a transfer to one creditor necessarily impairs the claims of the debtor’s other unsecured and undersecured creditors. By authorizing the avoidance of such preferential transfers, § 547(b) empowers the trustee to restore equal status to all creditors. Respondent thus contends that the ordinary course of business exception should be limited to short-term