Preference Defense

Preference actions are suits filed by business bankrupts (usually by a liquidating trustee) for the purpose of recovering payments to creditors made within 90 days of the date the debtor filed its bankruptcy case. Until October 17, 2005, creditors sued in preference cases had very little in the way of available defenses. However, among the preference recover changes contained in the Bankruptcy Abuse Prevention and Consumer Protection Act, effective in bankruptcy cases filed after October 17, 2005, is a substantial increase in the defenses available to creditors sued for the recovery of a preference.

We have represented preference defendants all over the country and have argued for broader protections for the recipients of preferential payments. Although there is only one statute in the Bankruptcy Code regarding the recovery of preferential transfers, how that statute is applied in each of the 11 jurisdictions throughout the country varies dramatically.

Upon receipt of a Notice of Bankruptcy Case Filing regarding one of your customers, we can provide you with a quick summary of your exposure to a preference action. Often, preference actions are not brought by the debtor’s bankruptcy estate for over a year after the bankruptcy case is filed. Knowing your preference exposure can help you to better prepare for a potential liability down the road. Contacting our office as soon as possible upon receipt of a preference demand letter gives us the best opportunity to resolve the matter short of expensive litigation. We resolve most potential preference cases before any litigation is commenced, and at a fraction of the original preference demand; also at a fraction of the cost of our big firm competitors. If litigation is necessary, we have the experience and resources needed to defeat preference claims at trial.