Over three years ago, in September 2013, Pirinate Consulting Group LLC, in its capacity as Litigation Trustee (the “Trustee”) of the NewPage Creditor Litigation Trust, began filing complaints in the Delaware Bankruptcy Court seeking the avoidance and recovery of what the Trustee alleges are preferential transfers. You can read our summary of the initial preference
ordinary course of business
Opinion in AES Thames – A Pro-Defendant Interpretation of the Ordinary Course of Business Defense
In a 9 page decision signed March 3, 2016 in the AES Thames bankruptcy, Judge Carey of the Delaware Bankruptcy Court held that the recipient of allegedly preferential transfers had received the transfers from the Debtor in the ordinary course of business. He thus concluded that the Trustee could not avoid and recover the transfers…
Decision in Archway Cookies Grants Summary Judgment Based on Ordinary Course of Business Defense
On September 1, 2010, Judge Christopher S. Sontchi of the United States Bankruptcy Court for the District of Delaware issued a decision finding that the payment practices between a creditor and debtor satisfied the ordinary course of business defense. Judge Sontchi’s decision is worth review as it provides a current look at one of…
Mortgage Lenders Network Files Preference Actions
In January, Mortgage Lenders Network commenced over 65 adversary actions against various defendants, seeking the avoidance and recovery of preferential transfers (read one of the preference complaints here). As reflected in its complaints, Mortgage Lenders filed a chapter 11 bankruptcy petition in the Delaware Bankruptcy Court on February 5, 2007. During the ten years prior to its bankruptcy, Mortgage Lenders grew from a small mortgage company with seven employees, to a residential mortgage provider serving 47 states with over 1,700 employees.
Given the commencement of Mortgage Lenders’ preference program, this post provides a brief summary of the elements and common defenses to preference claims.
Elements to a Preference Claim
In order to establish that a party received a preferential transfer, the plaintiff must prove that payments were received by a creditor on account of an “antecedent debt.” Further, the preferential payments must be made (i.) while the debtor was “insolvent”, (ii.) made within 90 days before the debtor filed for bankruptcy, and (iii.) the payments provide the creditor with more payments than it would receive if the debtor had liquidated under a chapter 7 liquidation.
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