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used the "going concern" value rather than the liquidation value test. As the Court noted, although the Trustee is entitled to rely on a presumption that the debtor was insolvent during the ninety (90) day preference period, if a creditor produces some evidence that the debtor was solvent, the trustee bears the burden of proof with respect to the debtor's insolvency.
The court approved the "two step" process in which the Court first decides whether to use the "going concern" or "liquidation" value of the assets for purposes of determining whether the debtor was insolvent. The Court approved the use of the going concern value since the debtor continued to conduct business under Chapter 11 protection for two and a half years and was able to pay its operating expenses. The opinion of the Bankruptcy Court, Wolkowitz v. Am. Research Corp. (In re DAK Indus., Inc.) 195 B.R. 117 (Bankr. C.D. Cal. 1996), focused on the decision of whether to use the going business or liquidation test and looks carefully to determine whether the debtor was on its financial deathbed at the time of the alleged preferential transfers.
In Villamont-Oxford Associates Ltd. Partnership v. MultiFamily Mortgage Trust 1996-1 (In re Villamont-Oxford Associates Limited Partnership), 236 B.R. 467 (Bankr. M.D. Fla. 1999), the Court found that even if the debt of the debtor is entirely non recourse, a partnership debtor is insolvent only if, after all of the net worth of the individual partners is added to the assets of the partnership debtor, the liabilities exceed the assets. The Trustee's assertion of solvency in a responsive pleading in a Reclamation matter does not constitute either a waiver or estoppel of the right to claim insolvency in an avoidance proceeding. Devan v. CIT Group/Commercial Servs., Inc. (In re Merry-Go-Round Enters., Inc.), 229 B.R. 337 (Bankr. D. Md. 1999). In Official Committee of Unsecured Creditors of Toy King Distributors, Inc. v. Liberty Savings Bank, FSB (In re Toy King Distributors, Inc.), 256 B.R. 1 (Bankr. M.D. Fla. 2000), the court carefully and thoughtfully examines solvency analysis factors.
In Diamond Power International, Inc. v. Babcock & Wilcox Co. (In re Babcock & Wilcox Co.), 274 B.R.
