Case Dismissed for No Payment Based on Subsequent New Value Defense
Before bankruptcy, the debtor operated as a neuromodulation medical device company while the defendant, our client, designed medical equipment.
After the debtor’s bankruptcy filing, the trustee brought an action against the defendant to avoid and recover $53,228.81 as allegedly preferential transfers.
We analyzed the facts of the case and showed that the defendant continued to provide subsequent new value to the debtor in an amount greater than the total claim in this case. Several courts have held that such new value may be offset against the claim amount, thereby reducing the full amount that a trustee can potentially claw back. In this case, the net claim amount after asserting the subsequent new value defense was reduced to zero.
Based on the strength of our defenses, Plaintiff decided to dismiss the case for no payment.