As mentioned in the first story in yesterday's edition of NACM's eNews, here is NACM's latest preference-specific issue brief.
NACM Issue Brief With Suggested Changes to Section 547 - Preference Statute
Under bankruptcy law, Section 547 of the Code requires that all payments made by a debtor to creditors within 90 days of a bankruptcy filing must be returned to the debtor's estate, unless the creditor can prove that the payment was made in the "ordinary course of business," that "new value" was given, or that the transaction was a contemporaneous exchange for new value. The fundamental premise of this section of the Code is to prevent any one creditor from receiving favorable treatment over other creditors.
Typically, the trustee for the debtor's estate or more recently the liquidating trust under a Chapter 11 plan will issue demands to all creditors who received a payment in this 90-day period without regard to any of the defenses. The NBRC wrote that there is an argument that "...Section 547 leads to abusive preference recovery suits by bankruptcy trustees who bring actions indiscriminately, without properly analyzing the creditor's available defenses, and to obtain settlements by creditors because of the litigation costs associated with defending these actions."