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Do Not Ignore a Bankruptcy Trustee’s Preferential Transfer Demand Letter

On Behalf of | Jan 15, 2015 | Bankruptcy, Business Transactions

It is possible that you individually or your business may find that someone 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, debtor-in-possession, or the Unsecured Creditor’s Committee 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. 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 company attorney responds to the demand letter with a good explanation of that defense and the facts with supporting documents, the claim may 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 if 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 [email protected].