Bankruptcy Litigation – Bankruptcy Preference and Defending Preferential Transfers

What is a Preferential Transfer?

United States Bankruptcy Court Seal

One of the most frustrating events to bankruptcy creditors is when the creditor receives a letter from a bankruptcy trustee demanding that the creditor repay monies paid by the debtor during the bankruptcy preference period, which is 90 days prior to the bankruptcy. Not only are you out money because you were not paid what you were owed, but now you are being asked to give back money!

Unfortunately for their recipients, preferences are real, and you can be compelled to return money to the bankruptcy estate. But, there are several defenses to preferences which can eliminate the need to repay the funds, or at least be used as leverage in settling the case for significantly less money. For example, you may have a defense if:

  • The payments were made in the ordinary course of business within the industry and based on past dealings with the debtor;
  • You provided goods or services after the transfers for which you were not paid (the “subsequent new value defense”);
  • The payment was contemporaneous with the provision of goods or services (for example, C.O.D. payments);
  • The debtor was solvent when it made the payment.

Years of Experience in Bankruptcy Litigation

The lead bankruptcy attorneys at Madoff & Khoury have represented clients for over 20 years in all aspects of bankruptcy litigation on both sides of the caption, whether it is a debtor, trustee, creditor or a transferee of a preferential transfer or fraudulent transfer. Such wide ranging experience provides the attorneys and Madoff & Khoury with unique perspective and ability in handling matters such as:

  • Evaluation and litigation of demand letters or lawsuits from trustees seeking to avoid or recover preferential transfers or fraudulent transfers;
  • Litigating objections to proofs of claim filed against parties that are justly entitled to claims in the bankruptcy estate;
  • Defending debtors who face adversary proceedings objecting to their discharge or the dischargeability of particular debts.

If you are looking for general advice about preferences, or are seeking representation to respond to preference demands or to defend you in any other bankruptcy-related action, please contact us at 508-543-0040.


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