11 USC § 547(c)(2) – Payment Made in the “Ordinary Course of Business”
A payment made by a debtor in his or her “ordinary course of business” is outside the scope of recovery of a preferential transfer action. This defense is the most common, and frankly, the most effective in a preferential transfer lawsuit as it now only requires the debtor and creditor to show the payment was part of a recurring customary credit arrangement between the parties. This defense is quite fact sensitive and requires a skilled bankruptcy litigator to raise properly.
11 USC § 547(c)(4) – Payment Made for “New Value”
This defense is fairly straightforward, if the debtor received new value, such as contemporaneous or subsequent services or new goods in exchange for the payment, the defense is established. This defense can also be raised as a partial defense to a preference action if a payment was made for part new value and partially for a previous outstanding balance owed. Again, raising the “new value” defense can be completely effective, but must be done carefully by a skilled bankruptcy litigator.
OC Preferential Transfer Action Attorneys
As you can see, preferential transfer action law can be quite fact sensitive and complex. In any preferential transfer action it is essential to have a knowledgeable and experienced bankruptcy litigator representing you. The bankruptcy litigators at McFarlin LLP will analyze your situation at no initial charge and give you and honest assessment of the situation. In most instances, creditors have valid defenses.
Call us today for your free consultation at: (949) 570-5025.