The Lawyer’s Role
Yes, you need a bankruptcy preference lawyer to Negotiate a Settlement of a Bankruptcy Preference.
Why? The proper assessment of the settlement of a bankruptcy preference claim is both an art and a science. The science part is taking the facts and applying the statute. The art is upstanding the entirety of the situation; applying that understanding to the current claim; and presenting the supplier’s or unsecured creditors case in a manner to extract the best possible settlement.
On the science side, no web site can replace a consultation with competent bankruptcy preference counsel. For example, the extensive discussions on the web emphasize the 3 most common defenses. There are actually 7 defenses. The reason most sites do not discuss the 4 others is because they are much more difficult to describe and very difficult to apply in practice.
We are seeing increasing sophistication by the law firms engaged in the prosecution of bankruptcy preference claims. Many are now claiming to have considered the defenses in making the demand. Some do. However, this consideration understandably is biased toward the client – the trustee, creditors committee or debtor in possession – whoever is given the task of pursuing preference claims.
How are these assessments “biased”? Often they do not consider the application of multiple defenses. See Multiple Payments – Multiple Defenses on this web site. In the case of the ordinary course of business defense, their calculation of the customary time interval between payments uses algorithms designed to limit the payments made in the ordinary course. They often will only consider one or two defenses.
Additionally, sometimes counsel for the debtor’s representative just makes a mistake. It happens.
On the art of bankruptcy preference negotiation, there are a multitude of factors that can affect the outcome of negotiations that are not obvious from the facts. These include timing of the negotiations, assessing opposing counsel’s desire to resolve claims outside of an adversary proceeding, other aspects of the supplier’s position including administrative claims and unsecured claims, and the list goes on.
