Preference Litigation

To succeed on a preference claim, the plaintiff must prove that the transfers at issue were made: (1) to or for the benefit of a creditor, (2) for or on account of an antecedent debt, (3) while the debtor is insolvent, (4) within 90 days of filing the bankruptcy petition, and (5) in such a way that it enabled the defendant to receive more than if the transfer had not been made. 11 U.S.C. §§ 547(b)(1)-(5).

And, importantly, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition.

There are seven (7) different affirmative defenses available to preference defendants enumerated in the Bankruptcy Code, three (3) of which are often times successfully utilized to reduce and/or completely eliminate preference exposure. Those three (3) most commonly used affirmative defenses are the “contemporaneous exchange defense,” the “ordinary course of business defense” and the “new value defense.”