Preferential Transfers

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 <i>prima facie</i> case. In this month's installment, we discuss preference avoidance by statutory exception, and the availability of a jury trial.

18 minute read April 26, 2004 at 10:08 AM

By

Ted A. Berkowitz And Aaron S. Halpern