Follow Us

Law.com Subscribers SAVE 30%

Call 855-808-4530 or email GroupSales@alm.com to receive your discount on a new subscription.

Bankruptcy Litigation

A New Regime in Preference Litigation

One of the provisions of the Small Business Reorganization Act amends the language of Bankruptcy Code Section 547 — which gives trustees and debtors in possession the right to seek to recover a payment to a third party in the 90-day period prior to the commencement of a bankruptcy case as a “preference” — to add a due diligence requirement. Though the intent behind the added language seems clear, it may not have its intended effect.

X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

To a layperson, the idea that a debtor can assert a cause of action against a company who supplied goods or services to a debtor before the bankruptcy case, whom the debtor then paid, seems preposterous. Yet the Bankruptcy Code gives trustees and debtors in possession that right in 11 U.S.C. Section 547 — the right to seek to recover a payment to a third party in the 90-day period prior to the commencement of a bankruptcy case as a “preference.”

To continue reading,
become a free ALM digital reader

Benefits include:

*May exclude premium content

Read These Next