Circuit City Bankruptcy Case: Are You a Preference Target?

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On November 4, 2010, the United States Bankruptcy Court for the Eastern District in Richmond, Virginia approved special procedures for the handling of actions to recover voidable preference payments in the Circuit City bankruptcy case, pursuant to Section 547 of the U.S. Bankruptcy Code. After gaining Court approval of those procedures, Circuit City filed over 500 adversary proceedings seeking to recover allegedly preferential payments that Circuit City made to individuals and entities in the 90 days prior the filing of its bankruptcy case.

The Virginia bankruptcy and creditors rights lawyers at Sands Anderson have extensive experience in defending parties which have been sued in bankruptcy court to recover allegedly preferential payments. It is our experience that the defenses most commonly available to preference defendants are that the payments were made in the ordinary course of business of the parties; that the payments were contemporaneous exchanges for new value; and that, after the payments were made, the preference defendant gave new value to the Debtor.

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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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