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Home Case Studies Debtor Did Not Pay as Per Agreed Payment Terms, Case Still Dismissed For No Payment

Debtor Did Not Pay as Per Agreed Payment Terms, Case Still Dismissed For No Payment

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The Debtors were engaged in the business of manufacturing and distributing soft surface floor covering based in Georgia. The Defendant, our client, is a not-for-profit shippers association based in Minnesota. The Defendant provided freight services to the Debtors.

The plaintiff sought to recover payments, worth $27,214.01 from our client, made during the 90 days before the Debtor’s petition date as preferential transfers.

Upon review, we found that the Defendant and the Debtors conducted business pursuant to a written agreement. Although, the agreed payment terms between the parties always remained “Net 30 days”, the Debtors never paid in a regular manner. The Debtors were habitual late payers and this payment manner remained consistent throughout the time the Defendant provided the services to the Debtors.

Based on our analysis, we established that the base period weighted average was 80.31 days and weighted average during the preference period was 81.56 days. Thus, we showed that a difference of 1.25 days in the weighted average during the base and preference periods did not diverge greatly from each other. Based on our analysis and the precedents, we were able to show that the Debtors’ payments during the preference period were ordinary.

We also showed that after receipt of the alleged transfers, the Defendant supplied services to the Debtors in the amount of $26,450.56, reducing the net preference claim to $763.45.

In all, we showed that the Defendant had a complete defense to the Plaintiff’s preference claim by virtue of 11 U.S.C. 547(c)(2) and 547(c)(4). Additionally, we also showed that the Defendant provided reasonably equivalent value to the Debtors.

Based on our position statement, the plaintiff agreed to dismiss the case for no payment.

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Jones & Associates

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