Defending Preference Lawsuits and Fradulent Transfer Lawsuits
You are probably reading this page because you are one of the thousands of businesses or individuals who are sued each year under the preference and fraudulent transfer provisions of the United States Bankruptcy Code.
At the New York law firm of Shaked & Posner, our lawyers are widely known for their practice in the highly specialized area of preference litigation and fraudulent transfer defense. We have represented hundreds of clients throughout the United States, including Fortune 500 companies, small businesses and individuals.
We have offices in both New York and Delaware, the locations where most preference and fraudulent transfer cases take place. In addition, we routinely represent clients in matters pending throughout the country through a network of local attorneys, with all substantive work being conducted at our offices in New York and Delaware, including preparation of all legal documents, communication with opposing counsel and negotiations.
We offer a free initial consultation to evaluate your situation. To view a list of preference and fraudulent transfer cases that Shaked & Posner has been involved with, please see our case list.
What is Preference Litigation?
If you received payment from a company within 90 days of that company's bankruptcy filing, chances are that you will be served with a summons and complaint indicating the commencement of a lawsuit to recover that payment: the preferential transfer.
Under section 547 of the Bankruptcy Code, the plaintiff needs to prove only the following to show that a preferential transfer existed:
- The transfer of an interest of the debtor in property (money was transferred to you)
- To or for the benefit of a creditor (you were owed money when you received it)
- For or on account of an antecedent debt owed by the debtor before such transfer was made (a debt was owed to you, not a simultaneous payment for delivery of goods or services)
- Made while the debtor was insolvent, on or within 90 days before the filing of the bankruptcy petition
- That enables the creditor to receive more than it would have received if the case were a Chapter 7 bankruptcy case.
If these conditions exist, as they usually do, then there is a presumption that the transfer was preferential. The burden now shifts to you to prove your defense.
While a number of defenses can be advanced that seek to defeat the presumption of a preferential transfer, the majority of cases fall under the following categories:
- Ordinary course of business: This basically means that, during the 90-day period, you were paid in the same manner as prior to the 90-day period – same number of days to receive payment, no collection efforts, no change in terms;
- Contemporaneous exchange for new value: This defense is available where the delivery of goods and services and the payment for such goods and services were made more or less simultaneously;
- Subsequent new value: This defense is available where, after receiving payment during the 90-day period, you continue to ship goods or provide additional services for which you do not receive payment.
Preference litigation is part of nearly every major bankruptcy case. Our lawyers have been involved in many major bankruptcy cases, including Montgomery Ward, TWA, Ames Department Stores, Iridium, Outboard Marine, eToys, U.S. Office Products, Teligent Services, Tower Automotive and many more.
See our Preference Litigation Defense Case List.
What is Fraudulent Transfer Litigation?
In bankruptcy, fraudulent transfer is similar to preference litigation. Both are considered avoidance actions. Both are becoming increasingly common as lawyers and trustees dig deeper for money to pay creditors. Examples of situations that result in fraudulent transfer litigation include:
- A company paying bonuses to executives and directors prior to filing bankruptcy
- One division of an insolvent company paying an invoice that was billed to another division
Another term for fraudulent transfer is fraudulent conveyance.
Fraudulent Conveyances Generally
In bankruptcy, fraudulent conveyances can come in one of two types, actual fraud or constructive fraud. Actual fraud involves the intent to defraud a creditor by transferring property within one year of the filing of bankruptcy. Constructive fraud involves a debtor who receives less than equivalent value in a transfer and the debtor is unable to pay debts at the time of or because of the transfer.
When considering either actual or constructive fraud, the court needs to make key determinations. In actual fraud, intent needs to be determined, and to help determine intent, the court will compare the situation to a set of circumstances that indicate a fraudulent transfer. In the case of constructive fraud, the court will use a series of factors to determine equivalent value and if less than equivalent value was given in the transfer.
An experienced attorney can help you with questions relating to and about fraudulent conveyances.
Our Approach to Defending You
At Shaked & Posner, we pride ourselves on our professional yet aggressive approach to litigation. This approach, coupled with the recognition and association of our name with preference defense cases, has generated valuable goodwill on our behalf.
Our attorneys work closely with all of our preference and fraudulent transfer defense clients to analyze and review the clients' relationship and business dealings with the debtor prior to the bankruptcy filing. This information is then analyzed to determine the strength of the defenses. Finally, we use our experience to achieve the best result possible for you.
Our focused approach to defending preference and fraudulent transfer cases has resulted in the successful defense of many cases. Our flexible fee arrangements include traditional hourly billing as well as a contingency fee basis. And as we generally represent more than one defendant, we may achieve greater bargaining power with the plaintiff and be able to reduce your costs through economies of scale.
Free Consultation with a New York City Lawyer
Some lawyers are all about the law. At Shaked & Posner, we think it's people that matter. Contact us for a no-cost evaluation of your preference and fraudulent transfer litigation defense case. Shaked & Posner defends preference and fraudulent transfer litigation clients in New York, Delaware and Nationwide.
