Vendors who sell goods to troubled businesses are often shocked when they are later sued by the debtor, a creditors’ committee or a trustee for the avoidance and recovery of preferential transfers. For the benefit of the uninitiated, the Bankruptcy Code permits the filing of lawsuits against creditors to avoid and recover payments on trade debt made during the 90-day period prior to the bankruptcy filing. The policy rationale behind this provision is to dissuade aggressive collection activities that often force the debtor into bankruptcy and to promote the equality of distribution among similarly-situated creditors. Preference actions are, by far, the most common form of litigation brought within a bankruptcy case and the amounts sought to be avoided and recovered can range anywhere from a few thousand to millions of dollars. Continue Reading THE BIG PROBLEM WITH SMALL PREFERENCES: The Inconsistent Application of the Small-Dollar Venue Exception Creates Opportunities for Knowledgeable Preference Defendants

Close-up of a bankruptcy petition

The TransVantage bankruptcy case and the resulting efforts by the Trustee to avoid carrier payments made by the defunct freight payment processor has been watched like an upcoming speed trap by the transportation industry concerned about the vulnerability of this business arrangement in bankruptcy. The more than 500 adversary Complaints filed in April of 2015 by the Trustee against the common carriers, shippers and customers of Transvantage Solutions, Inc. have been winnowed down to a just few remaining unresolved cases. Continue Reading The End of the Road for TransVantage Solutions, Inc.?

Hourglass BKR 17333100_Large(Part one in a two-part series on avoidance litigation in bankruptcy cases)

While initial consumer and commercial bankruptcy filings have, in recent years, ebbed in the wake of the historic highs of the Great Recession, the tail of the bankruptcy boom continues to vex the business community from an unexpected source — avoidance litigation against the debtor’s service and product vendors. The Bankruptcy Code permits a trustee or debtor in possession to avoid and recover certain payments, known as preferences, made by the debtor to its creditors during the 90-day period preceding the filing of its bankruptcy petition. The legislative policy objectives of preference avoidance rest on a dubious proposition: that all creditors should share equally in the debtor’s financial failure and that those creditors who successfully pressured the debtor for payment immediately before the bankruptcy should not gain a greater share of the estate than creditors who did not prey on a distressed debtor. Continue Reading BANKRUPTCY AVOIDANCE LITIGATION — DO I REALLY HAVE TO GIVE THAT PAYMENT BACK?

magnifying glass 4641319_LargeThe Chapter 7 Trustee appointed in the TransVantage Solutions, Inc. bankruptcy case ground the gears of the nation’s trucking industry this past April when he filed over 500 adversary complaints against common carriers, shippers and customers of the bankrupt company. Continue Reading The Road Ahead for TransVantage Solutions, Inc.