A preference is a transfer (usually a payment) that is made:
The idea is that it’s not fair for some parties to escape a bankruptcy unscathed (or less scathed) just because the company decided to “prefer” them over, or pay them instead of, other parties. The Bankruptcy Code allows the debtor or its representative (including a trustee or creditors’ committee) to recover those payments.
There are a variety of defenses to preference actions. For instance, a defendant’s liability may be significantly reduced or it may be able to convince the plaintiff to dismiss the preference action if (1) the debt was incurred and payment made in the ordinary course of business or financial affairs of the company and the defendant (the “ordinary course” defense), or (2) after the payment was made, the defendant provided goods or services to the company (the “new value” defense). The strength of a defendant’s defenses depends upon the facts of its particular case.
McGrail & Bensinger LLP zealously represents both plaintiffs and defendants in preference litigation.