You need a competent legal counsel to negotiate or otherwise defend a bankruptcy preference or other avoidance action. Why? The following is a list of just a few of the reasons. There are many others.
The Pro vs. the Novice: The law and practice of effective avoidance claim negotiation and defense can be complex and difficult. A person inexperienced in the negotiation and defense of avoidance actions is no match against a law firm that may have prosecuted dozens, hundreds or even thousands of bankruptcy preference and other avoidance claims.
Nothing is Certain: A plaintiff seeking recovery of an avoidance period payment only has an obligation to determine that it has “evidentiary support” for the elements of its case. A plaintiff can threaten or file an avoidance action even with uncertainty that it will prevail. Knowing whether the plaintiff may have problems proving its case often requires a “needle in the haystack” search through the debtor’s bankruptcy case.
That’s Why They are Defenses: The law firm that is seeking recovery of claimed avoidable payments is under no duty to identify or take into account potential defenses. For the novice defendant an early offer of a “discount” of 20 to 50 percent might seem like a deal. But is it? Many times those early settlement offers are made by the plaintiff without even considering if defenses exist.
Why Stop at 3 Defenses: The extensive discussions of preference defenses on the web emphasize the 3 most common defenses. There actually are at least 32 “defenses” specifically applicable to bankruptcy preference and other avoidance actions. So should a defendant pay up when 3 defenses appear unavailable, but potentially 29 others remain to be considered?
Mixing and Matching: Where there are multiple payments in the avoidance period, some of these 32 defenses can be used in a “mix and match” fashion – applying one defense to some payments and another defense to other payments. When mixing and matching is possible, even the 3 most common defenses can be very complex to apply. For example, when mixing and matching the subsequent new value defense and the ordinary course of business defense, an understanding of the difference between defense “availability” and defense “applicability” is required and the order of application of available defenses can make a big difference in the result.
Knowledge vs. the Knife: The goal of this web site is to provide avoidance action targets with knowledge. This web site is not intended to train a defendant how to negotiate or defend an avoidance claim. By analogy, if a patient is going to have surgery, his doctor would tell him about what he might expect, the likely outcome and the risks of the surgery. The doctor would never hand the patient the scalpel and say “have at it”.