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The Bankruptcy StrategistLJN NewslettersNewsSections

Preferential Transfers

By Ted A. Berkowitz and Aaron S. Halpern

Part Two of a Two-Part Article

Last month, we explained that when a once steady and reliable customer becomes delinquent in payment and eventually files for bankruptcy protection, your client becomes one of many creditors trying to recover a portion of its investment. We explained how, whenever a creditor receives a benefit from a debtor shortly before the debtor files for bankruptcy, a preferential transfer may occur. And we showed how section 547(b) of the Bankruptcy Code permits a trustee to avoid pre-bankruptcy transfers as “preferences.” The first tactic we discussed for defending such preference actions was to dispute plaintiff's prima facie case. In this month's installment, we discuss preference avoidance by statutory exception, and the availability of a jury trial.

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