Revised Ordinary Course of Business Defense to Preference Claims May Not Be as Effective as Anticipated By Michael S. Amato, Esq.


Preference claims have long been the bane of vendors and other creditors that have worked with and continued to extend credit to slow paying customers, or long term customers that suddenly found themselves struggling to pay their obligations as they became due. These creditors, who generally acted in good faith and attempted to work with customers through these difficult times, were often “rewarded” with lawsuits by bankruptcy trustees, debtors-in-possession or creditors committees seeking to recover payments made by customers that ultimately filed for bankruptcy protection. Defending against these “preference actions” is costly and time consuming, requiring unsuspecting vendors to defend difficult, technical litigation in unfamiliar and faraway jurisdictions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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