In the month of February 2016, Charles A. Stanziale, Jr., in his capacity as the Chapter 7 Trustee of BMT-NW Acquisition, LLC (“Debtor”), filed approximately 49 preference actions seeking the avoidance and recovery of alleged preferential actions under Sections 547 and 550 of the Bankruptcy Code.
By way of background, the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on February 14, 2014. On the same day, Mr. Stanziale was appointed as the Chapter 7 trustee to the Debtor’s bankruptcy estate.
Defenses to a Preference Action
Preference actions are a form of litigation specifically provided for in Section 547 of the Bankruptcy Code, which allows a Debtor or Trustee to recover payments made by the Debtor within the 90 days prior to declaring bankruptcy. Recognizing that these payments are not always made for inappropriate or “preferential” reasons, the Bankruptcy Code provides creditors with many defenses to preference actions. Included among these are the “ordinary course of business defense” and the “new value defense.” For readers looking for more information concerning claims and defenses in preference litigation, the below-linked reference guide prepared on this subject will prove helpful: “A Preference Reference: Common Issues that Arise in Delaware Preference Litigation.”
Carl D. Neff is a partner with the law firm of Fox Rothschild LLP. Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272.