In the 1907 case of Chapman, Trustee in Bankruptcy of McCoy, v. Bowen, the United States Supreme Court was tasked with determining whether a trustee in bankruptcy could recover payments made by an insolvent debtor prior to declaring bankruptcy. The debtor had given money to his father-in-law as payment for a pre-existing debt before filing for bankruptcy. The trustee argued that this constituted preferential treatment and sought recovery of these funds on behalf of all creditors. The court ruled against the trustee stating that under section 60b of the Bankruptcy Act (1898), such transfers were only voidable if they occurred within four months prior to filing for bankruptcy and if it can be proven that there was intent on part of debtor or creditor to give or receive preference over other creditors. In this case, both conditions weren't met as transfer happened more than four months before filing and no evidence suggested any intention towards preferential treatment. This decision clarified how courts should interpret "preferential transfers" under federal law - emphasizing not just timing but also intent behind transactions between bankrupt individuals and their creditors.

In the dissenting opinion for Chapman, Trustee in Bankruptcy of McCoy v. Bowen, Justice Harlan argued that the majority's decision was inconsistent with previous rulings and failed to properly interpret bankruptcy law. He contended that a debtor should not be allowed to retain property acquired after filing for bankruptcy but before adjudication if it is necessary to pay off creditors. This interpretation would ensure fairness among all parties involved by preventing debtors from benefiting at their creditors' expense while still under the protection of bankruptcy laws. Furthermore, he believed this approach would discourage fraudulent practices by individuals seeking to exploit these protections for personal gain rather than as a means of financial recovery.