DO NOT IGNORE A BANKRUPTCY TRUSTEE’S PREFERRENTIAL TRANSFER DEMAND LETTER

          With bankruptcies increasing, it is possible that you individually or your business may find that someone to whom you loaned money or a customer who owes you money has filed for bankruptcy.  Sometimes not only does that debtor leave a portion of the debt owed to you unpaid, but, to add insult to injury, the bankruptcy trustee sends a demand letter asking for the return of that portion of the debt repaid to you which you received within 90 days before the bankruptcy filing.  This is a preferential transfer claim under bankruptcy law.  There are defenses to preferential transfer claims.  If the transfer amount is less than $600 in a bankruptcy where most of the debts are consumer debt or $5,475 if most of the debts are commercial/business debt, then you may owe nothing.  Certain payments made to you either in the ordinary course of business or before you gave new value to the debtor may not have to be paid back.  The key is to contact an attorney to see if you have a defense.  If you do and your attorney responds to the demand letter with a good explanation of that defense and the facts with supporting documents, the claim often will go away or be reduced even if it is an out-of-state bankruptcy.  If you ignore the demand letter, you increase the likelihood of being sued, perhaps in an out-of-state bankruptcy court where you would then have to hire an out-of-state attorney in you desire to defend yourself. 

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf.  Attorney Marr is licensed and practices in both New Hampshire and Massachusetts.  Attorney Marr can be reached at dmarr@nashualaw.com.

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