preference action

Earlier this month Alfred T. Giuliano, the Chapter 7 Trustee for National Wholesale Liquidators, began filing various complaints seeking the avoidance and recovery of alleged preferential transfers.  On November 19,
Continue Reading Chapter 7 Trustee Files Preference Complaints in National Wholesale Liquidators Bankruptcy

Introduction

Two weeks ago,  preference actions were commenced against a long list of defendants in the New Century Mortgage (“New Century”) and Tweeter Home Entertainment (“Tweeter”) bankruptcies.  The plaintiff in
Continue Reading New Century Mortgage and Tweeter Home Entertainment Both File Preference Complaints Against Various Defendants

Introduction

In January, Mortgage Lenders Network commenced over 65 adversary actions against various defendants, seeking the avoidance and recovery of preferential transfers (read one of the preference complaints here).  As reflected in its complaints,  Mortgage Lenders filed a chapter 11 bankruptcy petition in the Delaware Bankruptcy Court on February 5, 2007. During the ten years prior to its bankruptcy, Mortgage Lenders grew from a small mortgage company with seven employees, to a residential mortgage provider serving 47 states with over 1,700 employees. 

Given the commencement of Mortgage Lenders’ preference program, this post provides a brief summary of the elements and common defenses to preference claims.

Elements to a Preference Claim

In order to establish that a party received a preferential transfer, the plaintiff must prove that payments were received by a creditor on account of an “antecedent debt.” Further, the preferential payments must be made (i.) while the debtor was “insolvent”, (ii.) made within 90 days before the debtor filed for bankruptcy, and (iii.) the payments provide the creditor with more payments than it would receive if the debtor had liquidated under a chapter 7 liquidation.

Continue Reading Mortgage Lenders Network Files Preference Actions