The U.S. Bankruptcy Code allows a trustee or debtor-in-possession to claw back certain payments or transfers made to a creditor during the 90 days prior to the petition date, based on the principle that such payments unfairly “preferred” that creditor over others. Keara Waldron and Michael Papandrea discuss how this can create a “catch-22” for vendors dealing with financially distressed customers. The very same steps a vendor may take to protect itself—such as imposing credit limits or holds, tightening terms, or ramping up See more +

The U.S. Bankruptcy Code allows a trustee or debtor-in-possession to claw back certain payments or transfers made to a creditor during the 90 days prior to the petition date, based on the principle that such payments unfairly “preferred” that creditor over others. Keara Waldron and Michael Papandrea discuss how this can create a “catch-22” for vendors dealing with financially distressed customers. The very same steps a vendor may take to protect itself—such as imposing credit limits or holds, tightening terms, or ramping up collection efforts—may ultimately compromise the vendor’s ability to assert an “ordinary course of business” defense in the event that the customer files bankruptcy and the vendor is sued for a preference, as occurred in the recent H. H. Gregg Ch. 11 case.

Speaker:

Keara Waldron, Senior Counsel, Bankruptcy & Restructuring Department

Michael Papandrea, Counsel, Bankruptcy & Restructuring Department

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Lowenstein Bankruptcy Lowdown

Attorneys in the firm’s Bankruptcy & Restructuring Department break down recent decisions and other key bankruptcy industry news and events. See less -