Difference of 1.22 Days Between Preference & Pre-Preference Period Transactions is Ordinary, Case Dismissed For No Payment

January 17, 2020, District of Kansas – The Debtor is a flooring manufacturing company based in Georgia.  Specifically, the Debtor is engaged in the business of manufacturing and distributing soft surface floor covering. The Defendant, our client, is a Kansas company providing freight services. The Defendant provided the services related to transportation of the Debtor’s products.

The plaintiff sought to recover payments, worth $15,646.84 from our client, made during the 90 days before the Debtor’s petition date as preferential transfers.

Upon review, we found that all the payments were made within the preferential period. Based upon our analysis, we established that the Debtors’ range of payments during the base period was 58 days to 216 days and the range of payments during the preference period was 71 days to 99 days.  Thus, all payments made during the preference period were well covered by the range of payments established during the base period. Thus, with the results of the “range of payments” test, we showed that the Debtors’ payments during the preference period were ordinary.

We also found that that the average period for payment of the Defendant’s invoices was almost identical during the base period and the preference period. During the base period, the Defendant’s invoices were paid on an average of 79.99 days. However, during the preference period, the Defendant’s invoices were paid on an average of 81.21 days. By citing relevant precedents, we established that the difference of 1.22 days between the base period and the preference period was negligible. Further, the timing of payments remained constant during the parties’ business relationship. Therefore, the alleged transfers were protected from the plaintiff’s avoidance power under Section 547(c) of the Bankruptcy Code.

In our position statement, we also asserted the subsequent new value defense. We showed that the Defendant supplied services worth $9,987.35 to the Debtors after the receipt of the alleged transfers. Thus, we contended that under Sec. 547(c)(4), the plaintiff cannot avoid the transfers to the extent of subsequent new value provided by the Defendant to the Debtor in the amount of $9,987.35, thereby reducing the net preference claim to $7,716.47.

Based on our defenses the plaintiff agreed to dismiss the case for no payment.

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