How to Deal With Preference When Your Customer Files Bankruptcy

April 19, 2016 | 68 Minutes

Despite an improvement in the overall U.S. economy, the rate at which companies are seeking bankruptcy protection has not slowed – in fact, for certain, industries bankruptcy has never been more popular. As a result, it is likely that every credit manager will be faced with a customer bankruptcy at some point in the near future. With a customer bankruptcy comes not only the pain of a costly write-off, but the potential exposure to a so-called “preference action.”

Topics covered include:

– A brief overview of the basic laws permitting a debtor in bankruptcy to sue creditors for recovery of preferential transfers
– The theoretical underpinnings of preference law.
– The common and not so common defenses to such actions
– Strategies to be explored that can be implemented proactively to protect against preference exposure.
– The effect of 503(b)(9) Administrative Claims and payments under critical vendor orders on the new value defense
– Detailed presentation of the current trends in case law on the application of the ordinary course of business defenses