Chapter 8 Conclusion

• Jurisdiction: United States

Chapter 8 Conclusion

Preference actions can be concerning to creditors for many reasons. After supplying product to a now-bankrupt organization and likely suffering significant losses associated with outstanding receivables or debts, the trustee or debtor in possession then attempts to extract additional amounts from the creditor. Further, to defend such actions, creditors often perceive that significant additional costs will be incurred for legal counsel and expert-witness analysis, reports and testimony.

While there are multiple analyses that can be considered with respect to preference matters, this book has focused on issues pertaining to ordinary-course defenses. The chapters contained herein are intended to assist bankruptcy professionals, credit account managers and others exposed to bankruptcy preference claims. Provided below are certain of the important elements of each chapter:

• Chapter 2 — Transfers made from the debtor to the creditor in the 90 days prior to the debtor's bankruptcy are often the subject of preference actions against the creditor once the debtor enters bankruptcy.³⁰⁴ While the Bankruptcy Code allows a debtor or trustee to avoid (i.e., recover) certain transfers made prior to its bankruptcy, it does not automatically provide that the debtor or trustee can recover all transfers occurring within the "preference period." The transfers in question must meet certain criteria as outlined in § 547 of the Bankruptcy Code. In the event the transfers meet these criteria, the creditor can present certain defenses to demonstrate that the payments were not preferential in nature, including the ordinary-course-of-business defense, as well as contemporaneous-exchange and new-value defenses. The creditor may employ both the objective and subjective tests in analyzing the transfers in relation to ordinary course in the industry and between the parties, respectively.
• Chapter 3 — Often, due to the complexities of systems, processes and data maintained by both the creditor and the debtor, there may be variety of challenges and necessary considerations as part of a detailed ordinary-course analysis. Accounting systems and processes can have a significant impact on the documentation of payments and the maintenance of the parties' books and records. The internal processes utilized by both the creditor and the debtor at each stage of purchase-order and invoice processing can impact the observed timing of payments and in some cases result in unique

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