How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask socrateaser Your Own Question
socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37965
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
10097515
Type Your Bankruptcy Law Question Here...
socrateaser is online now
A new question is answered every 9 seconds

The bankruptcy attorney Construction in Michigan has sent me

Customer Question

The bankruptcy attorney for Lamar Construction in Michigan has sent me an avoidance of transfer demand that I return 10,419.55 to the bankruptcy estate for payment I received for the rental of a crane.
The Lamar bankruptcy petition was filed July 11, 2014. I received payment approx June
12, 2014. HOWEVER...payment was due on February 12, 2014 per invoice.
I have never dealt with this customer previously. I realize the payment I received falls
within the 90 day reach back period. So this would mean that because the invoice was not paid until 4 months after the due date, I will be penalized? This meets no standard of either logic or fairness. Can the fact that invoice was DUE for payment (stated clearly on invoice) well before the reach back period be grounds for retaining the payment? In other words, had they paid per the terms of the invoice, which were standard and reasonable for my industry, I would have received payment prior to the reach back period. The fact that they strung me out now appears to be the basis for their claiming avoidance of transfer. Based on this logic, I get penalized because they paid late...hardly fair.
Submitted: 8 months ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 8 months ago.

Hello,

In order to actually avoid a preference transfer, the bankruptcy trustee must sue you and prove that the transfer is subject to avoidance. And, you would be entitled to defend, based upon grounds that the transfer was made in the ordinary course of business.

Needless to say, the cost of legal action is not free. But, the point is that the bankruptcy trustee will have attorney's fees, just as you will. Consequently, you can offer a settlement, given that it could easily cost at least $10,000 to sue you to recover the preferential transfer. Most of the time, such offers are accepted, because it's simply not worth the cost of litigating the issue.

So, you may want to send an offer letter and see if you can settle the matter.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, the website retains your entire payment, and I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

Expert:  socrateaser replied 8 months ago.

Hello again.

Please don't start a new Q&A session in order to ask a follow-up question, because you will be charged for two questions, and I will get paid for neither. That said, you asked:

You didn't at all answer the question. I know they can sue me. The question is: Can the fact that the invoice was DUE 90 days before the reach back period grounds for defending this with an ordinary course of business defense? Is their precedent for such a defense? I think I need someone familiar with bankruptcy law to answer this question and provide require references to specific cases.

A: I'm actually quite familiar with bankruptcy law. My previous answer was intended to demonstrate that you don't really need a defense at this point, because there is a cost effective means of avoiding a litigated resolution.

That said, a preference transfer of the debtor's interest is defined by Bankr. Code 101(54). A valid lien, foreclosure or some other actual disposition of the debtor's property must occur to create a transfer. An invoice which becomes due and payable, does not transfer the debtor's interest, unless the creditor is already holding a security deposit against future charges. If that's your circumstances, then the due date of the invoice would be relevant. Otherwise, the date of transfer, is the date when payment actually occurs.

Whether a transfer has occurred is controlled by bankruptcy law. See In re Walker (9th Cir. 1996) 77 F.3d 322, 323. But when a transfer occurs is determined by state law. The applicable law may be either Colorado or Michigan. Researching this issue would require about 30 minutes, and I can only do this as part of a premium services offer, because I need to be compensated for my time. Regardless, based upon your description of the circumstances, I don't believe that the law of any U.S. jurisdiction would regard the due date of an invoice as the date when a transfer of the debtor's property occurred -- because, no lien is thereby created, and no actual transfer takes place at that time. So, a premium services offer will likely yield an unproductive result.

If you actually want the research done, please let me know and I'll send the offer.

If not, then I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, the website retains your entire payment, and I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

Related Bankruptcy Law Questions