How many defenses to a bankruptcy preferential transfer recovery action are there? Well this is a matter of some debate. A bankruptcy preference “technocrat” would say there are 9. We have 32 “defenses” on our checklist for evaluating the defense of a bankruptcy preference claim.
We provide extensive discussion of the three most common defenses:
- the contemporaneous exchange defense
- the ordinary course of business defense
- the subsequent new value defense
The following are 6 lesser know defenses that work just as well and are routinely applied to defeat preference claims:
- the small commercial preference defense
- the purchase money security interest defense
- the state statutory lien defense;
- the Section 365 executory contract assumption defense (also know as the Kiwi defense);
- the “earmarking” doctrine; and
- the “venue defense”.
As a general rule, the most common and lesser know defenses can be combined in a mix and match strategy that we discuss in a separate video presentation and posts on this website. However, from time to time, one of the lesser know defenses involves proof of facts that might be inconsistent with the proof of other defenses. This should always be kept in mind.
All of these defenses rely in whole or in part on the supplier’s books and records.