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A recent decision of the United States Bankruptcy Court for the Northern District of Iowa serves as a reminder that banks should proceed with caution when relaxing bank procedures to appease large account holders.  In the bankruptcy case Sarachek v. Luana Savings Bank (In re Agriprocessors, Inc.) [1], the court ordered a bank to disgorge over $1.5 million for allowing repeated account overdrafts, which the chapter 7 bankruptcy trustee successfully argued were essentially short-term loans made to the debtor by the bank prior to the bankruptcy filing. 

This article discusses (i) how payments made to a creditor by a debtor within ninety (90) days prior to a bankruptcy filing may be recouped by a debtor or trustee in bankruptcy; (ii) the bankruptcy court’s recent decision in the Agriprocessors bankruptcy case requiring a bank to fork over $1.5 million to the debtor’s bankruptcy estate; and (iii) the key takeaways of that decision.   

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