Preferential Transfer Actions

Creditors, wholesalers, and others who receive payment from their clients or customers typically have no reason to believe that those funds may be subsequently sought through legal action. Unfortunately, when these payments are made in the 90-day period immediately preceding a bankruptcy filing, the Bankruptcy Trustee may choose to pursue a preferential transfer action against a business. These legal actions can sometimes have severely detrimental effects on a business, as they may result in unexpected losses.

 

Bankruptcy law can sometimes be confusing and it is important to consult with an experienced bankruptcy attorney regarding your business’ rights. Contact Birmingham bankruptcy attorney Paula Greenway today at (205) 324-4000 if you have received a notice of a preferential transfer action.

Requirements for a Preferential Transfer Action

Preferential transfer actions are covered under Section 547 of the United States Bankruptcy Code. There are certain elements that must exist in order for a preferential transfer action to proceed, including:

  • The existence of an actual transfer

  • Creditor benefits resulting from transfer

  • The transfer addressed some previous debt

  • Transfer occurred during an insolvency period for debtor

  • Transfer occurred within 90-day term before a bankruptcy filing

  • Proof that the transfer allotted greater payment to the creditor than the creditor would have received under normal Chapter 7 bankruptcy

 

If a business that is being sued for a preferential transfer action can prove that even one of these elements does not exist, it may avoid a preferential transfer lawsuit, which can be a tremendous boost, financially.

 

Contact Us

If your business is facing a preferential transfer lawsuit, the help of an experienced Birmingham bankruptcy attorney can be especially important. Contact Paula Greenway today by calling (205) 324-4000.

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