A preference action refers to a lawsuit brought under the U.S. Bankruptcy Code in which a creditor or bankruptcy trustee seeks to get pre-bankruptcy payments reversed. Under U.S. law, bankruptcy courts can automatically review all payments made by the filing business, to any party, within the last 90 days before the bankruptcy petition was filed. Courts have the authority to force individuals and companies that received inappropriate payments to compensate damaged creditors. In this post, our top-rated San Jose business bankruptcy attorneys discuss one of the common defenses that can be used to fight against preference lawsuits: contemporaneous exchange for new value.
When you file for a bankruptcy in California, you may exempt, or protect, some of your property from creditors. In a Chapter 7 bankruptcy, you are allowed to keep this property. In a Chapter 13 bankruptcy, exempt property will not be counted towards the value of your assets, which ultimately reduces your monthly payments to creditors.
When you are engaged in the business of supplying goods, you have the ability to reclaim these goods when the buyer fails to pay. In rare instances, buyers will purchase more goods than usual, stock up inventory, then file for bankruptcy in an effort to refuse paying for the goods. When the business to which you supply goods becomes insolvent, it may seek protection of federal bankruptcy laws in order to prevent you from recovering any money owed. Regardless of the situation, no business owner wants to ship goods to buyers for free, without payment.