Are you the creditor or the debtor?
The preference statute sets forth a number of defenses. However, the most common mistake of preference defendants (whether the creditor who received the payment or the debtor who disbursed the payment) is to jump to preference defenses and to overlook the trustee’s burden of proof with respect to the prima facie elements of a preference claim.
If I had more information, I may be able to better assist you.
I am the creditor. Amount in question is over $13000 ( so it's over $5000). Payments were received within 90 days. I just want to respond, using a sample letter and include a schedule (account history, that shows the "ordinary course of business" )
The ordinary course of business defense can be a very difficult defense to prove and require extensive use of the debtors books and records covering a potentially extended period. It's difficult because in addition to showing that a payment was made in ordinary course of business of the creditor’s industry, a creditor also must be prepared to demonstrate that the payment was in the ordinary course of the debtor’s business from the perspective of the debtor’s industry.
This also makes it difficult to provide a sample letter specific to your situation without a consultation and complete breakdown of the facts surrounding the preferential payment. However, your letter should look something like this...roughly:
The following sample assumes that you have received a demand letter from a trustee concerning the preferential payment.
Trustee City, State, Zip
RE: Response to Preference Demand In re: Debtor’s Name. Case No. ___________
My name is XXXXX XXXXX am the ___________ (owner, president, etc) of (insert Name of Creditor), a creditor in the above referenced case.
Although (insert name of Creditor) received funds from the Debtor while the Debtor was insolvent, during the ninety-day period preceding the Petition Date (i.e. (insert date), through (insert date), the “Preference Period”) and the transfer is neither avoidable nor recoverable because the transfer was made in the ordinary course of business from the perspective of both (insert name of Creditor) and (Insert name of Debtor).
Insert your facts here. Remember, in addition to showing that a payment was made in ordinary course of business of your industry, a creditor also must be prepared to demonstrate that the payment was in the ordinary course of the debtor’s business from the perspective of the debtor’s industry
Section 547(c)(2) provides that transfers made by the debtor in order to pay debts which were incurred by the debtor in the debtor’s ordinary course of the debtor’s business are not avoidable if either: (1) the transfer to the creditor was made in the ordinary course of business between the debtor and the creditor; or (2) the transfer was made according to ordinary business terms. BAPCPA modified the test for whether a payment is made in the ordinary course of business by making the requirements above disjunctive. 11 U.S.C. § 547(c)(2)(A) and (B). Previously, a creditor was required to show that the transfer was made in the ordinary course of business between the debtor and the creditor and that the transfer was made according to ordinary business terms. See Advo-System, Inc. v. Maxway Corp., 37 F.3d 1044 (4th Cir. 1994). Therefore, under BAPCPA, when a creditor cannot demonstrate that the transfer was made pursuant to the ordinary course of business between the parties, it still can successfully defend against a preference claim if it can demonstrate that the transfer was made pursuant to “ordinary business terms”. Considering the facts stated above and the supporting documents being sent with this letter, (insert name of Creditor) has demonstrated that the transfer was made pursuant to “ordinary business terms”.
Furthermore, Section 547(b)(5) requires the trustee to demonstrate that the allegedly preferential transfer allowed the transferee to receive more than it would have received if the debtor had been in a hypothetical Chapter 7 case at the time of the transfer. In the Preference Demand letter (insert name of Creditor) received, dated _____, the trustee failed to demonstrate that the allegedly preferential transfer allowed the transferee to receive more than it would have received if the debtor had been in a hypothetical Chapter 7 case.
If you have any additional questions or concerns, please do not hesitate to contact (insert name of creditor) via phone: ___________, fax: _______________ or email: _______________________. We look forward to reaching an n amicable resolution to this matter.
Your representative capacity for Creditor
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