Debtors were a New Jersey-based company that provided comprehensive health and wellbeing programs offered through organizations’ sponsorship. They also offered health coaching to support positive health risk migrations for individuals through these services. The Defendant, our client, manufactured and shipped custom-made corrugated packaging materials and packaging support materials to the Debtors.
Upon the Debtors’ bankruptcy, the liquidation trust for the Debtors brought a clawback action against the Defendant to avoid and recover transfers amounting to $36,637 as either preferential or fraudulent transfers.
After completing an in-depth analysis of the case, we concluded that all of the alleged preferential or fraudulent transfers were payments made in advance pursuant to the terms of the agreements between the Debtors and the Defendant. One of the required elements of a preference claim is that the transfers in question must be made for or on account of an antecedent debt; in other words, the debt must have preceded the transfer. Since all of the transfers made to our client were prepayments, the Plaintiff did not have a valid preference claim, and the transfers were thus protected from recovery.
We also proved that Plaintiff failed to indicate any factual basis for his fraudulent transfer claims and that Debtors received reasonably equivalent value in the form of products in exchange for the transfers.
As the Defendant had airtight defenses, Plaintiff agreed to dismiss the case for no payment.