Learning how to defend a preferential transfer action is a particularly useful art for the credit professional. In Part One, we discussed the Bankruptcy Code’s specific requirements that must be established by the debtor or trustee in order for a transfer to be considered “preferential,” and subject to avoidance (return to the debtor’s bankruptcy estate) […]
The Art of Defending Preferential Transfers – Part Two: The Defenses
Defending Preferential Transfers: The Ordinary Business Terms Defense- Part V: Failures Using the Ordinary Business Terms Defense
Like all other defenses, the defendant/transferee must provide evidence establishing the elements of the ordinary business terms defense. Much can be learned from the many seeming half-hearted attempts to prove an ordinary business terms defense. For example, the lack of competence of witnesses (whether expert or non-expert) and failure to identify the relevant industry or […]
Defending Preferential Transfers: The Ordinary Business Terms Defense- Part IV: Proving up the Ordinary Business Terms Defense
Once a debtor or trustee establishes a transfer is a preferential transfer, the burden falls upon the creditor to establish one or more of the defenses to avoidance set forth in Bankruptcy Code section 547(c), such as the “ordinary business terms” defense set forth in Bankruptcy Code section 547(c)(2)(B). Defining the Relevant Industry Recent case […]
Good News for Creditors: Preferred Treatment of Trade Claims Incurred in the 20 Days Before Bankruptcy
When a company files bankruptcy, trade creditors are frequently left in financially vulnerable positions. Trade creditors are generally unsecured, and frequently receive only pennies on the dollar from bankrupt debtors’ estates. We are frequently asked whether trade creditors have any recourse against a debtor to improve their likelihood of recovery. One of our first questions […]
The Art of Defending Preferential Transfers-Part One: The Basics
Creditors face any number of perils when an account debtor files for bankruptcy – loss of sales, likely risk of collection of amounts owed, legal fees and more. One more challenge a creditor might encounter is a possibility the now-bankrupt debtor or a bankruptcy trustee will demand the return of prepetition debt payments made by […]