WHAT IS A PREFERENCE CLAIM AND WHAT CAN A CREDITOR DO ABOUT ONE?
By Sara L. Abner and Miles S. Apple If you have in recent years found yourself faced with a preference claim, you are not alone. Preference actions have been a hot bed of activity since 9/11 and the subsequent increase in bankruptcy filings. The scenario generally follows a typical pattern. Your company has been doing business with another company for some time. Suddenly, that company files for bankruptcy and the trustee sends you a letter asserting a preference claim for payments your company received prior to the bankruptcy filing. You are faced with two major questions: (1) what is a preference, and (2) what can you do about it? A preference payment is basically a payment that was made by a debtor to a creditor during the 90-day period immediately preceding the debtor’s bankruptcy filing. In understanding what a preference is, it is helpful to understand the purpose behind preference claims. The purpose is to prevent a debtor from preferring one creditor, or a select group of credit
