In In re Kossoff PLLC [2026] SDNY, the US Bankruptcy Court for the Southern District of New York recharacterised merchant cash advance (MCA) and future receivables purchase agreements as disguised secured loans. The Court held that illusory reconciliation mechanisms and fixed daily ACH sweeps shift no true collection risk to the funder, exposing over $14 million in pre-petition transfers to Chapter 11 preference and fraudulent conveyance avoidance actions.
- Practice Impact: Restructuring officers managing distressed entities with US receivables financing must audit financing arrangements under SDNY true-sale criteria to identify clawback opportunities.
- Source: Read Eversheds Sutherland's SDNY Recharacterisation Analysis.
SDNY: Bankruptcy Recharacterisation of Disguised Receivables Transactions (In re Kossoff PLLC)