%1

Section 503(b)(9) of the Bankruptcy Code creates a priority status for claims for “goods” that were delivered to the debtor within the 20-day window preceding the filing of a bankruptcy action. These claims typically get paid in full and ahead of other claims, thus § 503(b)(9) claims status is highly coveted.

Currently in New York State, creditors’ ability to avoid fraudulent transfers is governed by one of two different statutory schemes, depending on when the transfer occurred. Although New York State adopted the Uniform Voidable Transactions Act in 2019, New York’s predecessor fraudulent transfer statute, the Uniform Fraudulent Conveyance Act, still governs those transfers that occurred prior to April 4, 2020. These two statutory schemes each have different limitations on time to commence an action.

Section 547(c)(2)(A) of the Bankruptcy Code, often referred to as the “subjective OCB defense,” provides a defense to a preference suit if the defendant can show that the challenged payments made during the 90-day preference period are sufficiently consistent with the historical payments made by the debtor to the defendant.

Trade creditors will undoubtedly want to take steps to protect themselves when dealing with financially distressed customers that are potentially heading toward bankruptcy — such as by decreasing credit limits, tightening payment terms or otherwise ramping up collection efforts. However, those same steps may come with the unintended consequence of compromising a creditor’s ordinary-course-of-business defense in the event that the customer files bankruptcy and the creditor is sued for a preference claim. This catch-22 was recently exemplified by a January 2022 decision in the U.S.

Under the Bankruptcy Code, the U.S. Trustee [1] has the power to appoint a committee. [2] Section 1102(a)(1) of the Bankruptcy Code requires U.S. Trustees to appoint a committee of creditors holding unsecured claims in all cases “as soon as practicable after the order for relief....” [3]