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    The Preferential Transfer Dragon
    The Preferential Transfer Dragon
    The Preferential Transfer Dragon
    Ebook68 pages59 minutes

    The Preferential Transfer Dragon

    By J. Roger Foster

    ()

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    About this ebook

    To be forewarned is to be forearmed

    If you’re facing a preferential transfer lawsuit for the first time, this article is written primarily for you. You can go online to find a lot of information on the subject, but what this article covers is the experience of one business that faced this problem for the first time and what it went through. The experience the business faced wasn’t a worst case scenario, but it came close enough.

    The people and businesses who would benefit the most from this article are the least likely to buy it. They have customers who could potentially go bankrupt, but have enough on their plate without having to deal with the hassle of considering the ramifications of a preferential lawsuit. If you’re in this category, then arguably the single most important thing you can do is put in place consistent and appropriate billing practices and the article explains why. It will take you about 45 minutes to read the article and put you that much further ahead of the game.

    For an article of this length the price is kind of high, but it’s the best deal you’ll get all day if you’re dealing with a lawsuit of this type for the first time. Of course, you may be in a position where you can afford to throw away $19,000. That’s about what it cost the business owner in this article to learn the lessons presented. You, on the other hand, can learn these lessons for the three dollars it costs to buy this article and the time it will take to read it and read some of the included references. If you’re facing this situation for the first time and this article turns out to be completely useless, the authors are quite confident you won’t give it a second thought after the hell you’re about to go through.

    Many, and maybe most, people who face lawsuits tend to give in because they fear the law. In this case paying up without a fight could be a valid option, but you would be better off making the decision for rational reasons instead of out of fear.

    This is a direct quote from the website of Fox Rothschild LLP Attorneys at Law out of Wilmington Delaware. The title of the blog article is “Money Center Opinion – The Multiple Sovereigns in the United States and Bankruptcy” The link is: https://delawarebankruptcy.foxrothschild.com/articles/opinions/

    "If you are a named defendant in a preference action, the first step is to make sure you understand the law surrounding preference litigation. Educate yourself, then have your lawyer start a dialogue with the Trustee’s lawyer. The vast majority of preference actions settle or are dismissed once the parties understand whether there were actual preference payments or not. If you are in the lucky position to have not yet had a client or customer go through bankruptcy, (1) count yourself lucky and (2) start making plans to protect yourself for when one of them does go under. It isn’t pretty, but since most of us aren’t foreign sovereigns [the article concerns federally recognized Indian Tribes and sovereign nations], we need to plan carefully to reduce our preference exposure."

    That is about as good a way to put it as you can get. A little bit of education on your part can go a long ways. Dumping your problems into a lawyer’s lap in the blind hope that they’ll make it all come out right will not be a sufficient response. You control the way your business is run, your lawyer doesn’t.

    LanguageEnglish
    PublisherJ. Roger Foster
    Release dateJan 1, 2016
    ISBN9781311097545
    The Preferential Transfer Dragon
    Author

    J. Roger Foster

    J. Roger Foster has ten years experience as an avionics technician in general, business and commercial aviation. He has worked as a contractor in the avionics and systems engineering department for an airline. His current employer is AFTA (Avionics Field Teams Associates) which provides staff engineering support for owner/operators.

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      Book preview

      The Preferential Transfer Dragon - J. Roger Foster

      The Preferential Transfer Dragon

      by

      Jim Miller

      &

      J. Roger Foster

      Introduction • A Customer Goes Bankrupt

      References

      Motivations of a Bankruptcy Trustee: Know Your Enemy

      Ordinary Course of Business Defense • New Value Defense

      Filing a Claim

      What Stiffed Did Right • What Stiffed Could Have Done

      Hiring a Lawyer

      Conclusion

      Copyright © 2016 Jim Miller & J. Roger Foster

      Cover drawing by Jay Flores

      Smashwords Edition

      Introduction

      One consequence of having a customer go bankrupt is the risk of having to return preferential transfers to a bankruptcy trustee. Whatever the customer paid you 90 days prior to filing for bankruptcy is at risk of being considered a preferential transfer. If you’re an insider of the bankrupt company, the lookback period is an entire year. Suppose your customer made payments during the 90 day period of $6,400, $3,100, and $870. That’s a total of $10,370. Ok, now pay it all back. Wait a minute…what?! You can’t be serious! Yes, the bankruptcy trustee is serious. That is what a preferential transfer lawsuit entails.

      This article was written to help you fight a preferential transfer lawsuit. You might think you have no interest in such a seemingly arcane and academic subject. However, if you get a letter or notice from a bankruptcy trustee demanding that you pay back hundreds, thousands, or tens of thousands of dollars, your interest in this subject will increase – a lot. Unfortunately, once you’re contacted by the bankruptcy trustee, you’ll have to deal with the subject whether you’re interested in it or not.

      The expectation is that most of our readers will get a service of process notification or letter from a bankruptcy trustee demanding repayments of alleged preferential transfers. For those readers the authors have a goal of saving each of them a $1,000 and maybe some time and grief. For sure, a thousand dollars is setting the bar pretty low. As a goal, it’s modest to point of being anemic considering that alleged preferential transfer claims can vary from hundreds to millions of dollars. We really hope to save you a lot more than $1,000, but have to start somewhere.

      To give you fair warning, this article does not constitute legal advice. This isn’t just a matter of the authors covering their asses. In the story related below the business owner made mistakes and you shouldn’t repeat them. Good legal representation at the outset could have made a significant difference. The business owner’s understanding of the law went from nil to imperfect and incomplete. In the opinion of the authors, hiring a lawyer is almost inevitable in these types of cases. We aren’t happy to have to tell you that, but that’s the case. Lawyers are expensive and should be used effectively. This article will help you do that and will help you avoid dumb, expensive mistakes.

      So, what good is it going to do if we address a legal issue without giving you legal advice? Well, if the business owner in the narrative below had known the information in this article from the start, an educated guess is that he could have cut the total cost of his lawsuit from $19,000 to about $8,000. There was even an outside chance that he could have cut the expense of the lawsuit to less than a $1,000. As far as that goes, if he’d stopped doing business with his customer soon enough, there wouldn’t have even been a lawsuit.

      This article has a section on Hiring a Lawyer. It will help you find a lawyer with expertise in this field and do it quickly. By following the advice in this section, you should be able to find two or three good prospects within about an hour.

      In the story below a lot of things went wrong for the business owner. You can learn from his misery and mistakes. There is a section on what the business owner did right and a section on what he could have done. While we can’t tell you what you should do in your situation, the lessons to be learned from this account are painfully apparent. It’s one thing to read up on the theory of this subject; a real world example will drive the point right home.

      Over 30 hyperlinked references are included to give you a quick and dirty education about preferential transfer lawsuits. In some cases there is an expanded discussion of a reference to emphasize information that might be especially helpful. Most of these references have been posted by lawyers with expertise in the field of preferential transfers and you won’t have to stumble around on the internet to find them.

      It’s somewhat off topic, but there is material on filing a claim if your customer went bankrupt owing you money. Being notified that your customer filed for bankruptcy is notice that you’re going to have problems in the future.

      The better your knowledge of preferential transfer lawsuits, the

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