May 28, 2020

Almost As Certainly As Night Follows Day: “Preference” Proceedings Follow Bankruptcy

Bankruptcy Claim

The recent pandemic-induced spike of bankruptcy filings by major retail apparel chains will likely lead to a flood of “preference” proceedings in which attempts will be made to “clawback” payments to vendors. A preference is a payment to a creditor in the days leading up to a bankruptcy by which a creditor was improperly preferred over others. When this happens, the Bankruptcy Code allows the trustee (and sometimes others) to bring a preference action to recover the preferential payments for the benefit of the debtor’s estate. The Bankruptcy Code defines a preferential payment as any payment for a debt made… Read more