(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
So, what is a preference? Think of it like this: If someone knew that they weren’t going to be able to pay all of their bills and may go out of business, is it possible that person might choose to pay debts to family or friends or preferred businesses first before paying a random third party? Or choose to pay their most important supplier or contractor before others, if you call that a choice, solely for reasonable business purposes, trying to keep the business afloat. Not only does it not require intent on behalf of the party receiving the payment (the potential Defendant), but it does not necessarily require intent by the debtor making the payment.(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
Other defenses include:
Although that sounds simple enough, it is not quite that straight forward. The defense based on the transfers having been made in the ordinary course of business is especially complicated. There is a special language that needs to be conveyed to Plaintiff. It is not simply that the Defendant did not do anything wrong or that it would not be fair to require Defendant to pay money to Plaintiff on top of all other losses.
Ultimately, these very unfair laws allow Plaintiffs to try to take money from you. On one hand, it is like Robin Hood, stealing (i.e. “legally clawing back payments”) from those who have been paid (at least in part) during the 90 days before the bankruptcy filing, and giving it to those who have not been paid. But it is not necessarily about taking from the rich and giving to the poor. In many cases, we are talking about Defendants who have suffered significant financial pains from the bankruptcy, such as loss of business and unpaid bills, and now the Defendant is being sued for more money, and will undoubtedly have to pay legal expenses. And the Defendant didn't do anything wrong! How is that fair? It is not, but it is the law. Fortunately, there are defenses available to you. We cannot guarantee results, but in the vast majority of cases, the very nature of the law and litigation process in these cases will very likely lead to a cost savings if you hire a lawyer to defend the case. We can discuss all of that with you during a consultation. Call us at (302) 655-5303 or contact us today at info@tobialaw.com