In the case of Galbraith v. Vallely, Trustee in Bankruptcy of Reiswing, Bankrupt (1920), the US Supreme Court was tasked with determining whether a bankruptcy trustee could recover payments made by a bankrupt party to their creditor within four months prior to filing for bankruptcy. The debtor had paid off his debt to Galbraith during this period and later filed for bankruptcy. Vallely, as the appointed trustee overseeing Reiswing's assets and debts, sought recovery of these funds on behalf of all creditors under Section 60b of the Federal Bankruptcy Act which prohibits preferential transfers that favor one creditor over others. The court ruled in favor of Vallely stating that such payments were indeed voidable preferences under federal law if they occurred within four months before declaring bankruptcy and if at that time debtor was insolvent or became insolvent as result thereof; also when payment enabled creditor to obtain greater percentage than some other creditor class. This decision reinforced equitable treatment among creditors in cases where an individual declares bankruptcy ensuring no single entity is given undue preference over others.

In the dissenting opinion for Galbraith v. Vallely, it was argued that the majority's decision to uphold a bankruptcy court's ability to set aside fraudulent conveyances of property made by a debtor prior to declaring bankruptcy was incorrect. The dissent contended that this power should not be extended beyond what is explicitly stated in federal law and believed that such an extension could lead to potential abuses of power by bankruptcy courts. They also disagreed with the majority’s interpretation of relevant statutes, arguing they did not grant such broad authority. Furthermore, they expressed concern over how this ruling would impact future cases and potentially infringe upon states' rights regarding their own laws on fraudulent transfers.