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Home Case Studies Difference of 1.2 days in the payment averages resulted in dismissal of the preference claim for no payment

Difference of 1.2 days in the payment averages resulted in dismissal of the preference claim for no payment

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Debtors were engaged in manufacturing and distributing soft surface floor covering in Georgia. Defendant, our client, is a not-for-profit company based in Kansas and provided freight services to the Debtors.

After the Debtors filed for bankruptcy, Plaintiff sought to recover payments made to the Defendant for its services as allegedly preferential and fraudulent transfers. During the ninety days before the petition date, Debtors made ten wire payments in an amount totalling $15,646.84, which was the subject of this case.

Upon analysis, we were able to prove that the payments received in the ninety days before the petition date were fairly identical to the two years prior. All the ten transfers in question fell in the historical range of payments, and were made only 1.2 days late on an average. With established precedents, we proved that payments made in such similar fashion fall under the ordinary course of business defense and are protected from the Trustee’s avoidance powers. We also proved that the after the first allegedly preferential payment and before the petition date, Defendant provided subsequent new value of $9,987.35, which could be set-off against the claim amount in question.

Moreover, we also proved that the transfers were made in good faith, according to contractual terms, and for reasonably equivalent value. We alleged that the Trustee’s fraudulent claims fail as a matter of law because he did not sufficiently plead his actual fraud claims.

Based on the strength of our defenses in the position statement, the Trustee agreed to dismiss the case for no payment.

 

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Jones & Associates

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