United States Supreme Court Lends Hand to Preference Defendants: Trustees Need to State a Case

Thorne, Deborah, Business Credit

Before defendants in preference cases go through the laborious process of analyzing a plaintiff's case, a quick review of the complaint to identify whether there are any supporting facts may give them an escape route or leverage in defending the case.

That's the insight many have gleaned from United States Supreme Court and several bankruptcy cases over the last several years that have provided new pleading requirements.

Before a discussion on the requirements, it is important to understand the context.

Preference Defense: A Primer

Once you are served with a summons in a preference case, creditors and attorneys naturally jump to analyzing whether new value or ordinary course defenses can be asserted to the claims of the trustee. While this is important to do, many preference defendants fail to examine whether the plaintiff trustee or debtor has or can state a case for the recovery of a preferential payment. A brief review of the facts contained in the complaint and whether the facts support the legal claim may allow a defendant to cut to the chase in defending a claim.

As anyone who has been sued by a trustee or creditors' trust knows, the plaintiffs generally send a demand letter and file suit against anyone who received a payment during the 90 days prior to the bankruptcy petition date. The information relied upon to file the complaint …

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Publication information: Article title: United States Supreme Court Lends Hand to Preference Defendants: Trustees Need to State a Case. Contributors: Thorne, Deborah - Author. Magazine title: Business Credit. Volume: 113. Issue: 5 Publication date: May 2011. Page number: 22+. © 1999 National Association of Credit Management. COPYRIGHT 2011 Gale Group.

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