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Insights Insights
| 1 minute read

Protect Yourself at All Times . . . Especially if Your Customer is Headed to Bankruptcy Court!

The Taylor English Creditors’ Rights and Bankruptcy team is closely monitoring the rise in bankruptcy filings. As the economic landscape evolves, our team vigilantly tracks significant developments to ensure clients are well-prepared to navigate these challenging times.

According to the Administrative Office of the U.S. Courts, there were 418,724 bankruptcy filings in the year ending June 2023, in contrast to 380,634 cases in the prior year. On June 30, 2023, business filings experienced a 23.3 percent surge, rising from 12,748 to 15,724. Also, non-business bankruptcy filings increased by 9.5 percent, reaching 403,000. This stands in comparison to the 367,886 cases in the preceding year.

Creditors in this economic climate should be particularly concerned over the threat of bankruptcy "preference" liability. A preference is an otherwise legitimate payment received from a creditor’s customer within 90 days before the customer files for bankruptcy protection. Under the Bankruptcy Code, a trustee in the customer’s bankruptcy case may be able to force the creditor to return the payment to the trustee.

The Bankruptcy Code provides certain defenses to preference recovery actions, and there are steps a creditor can take before its customer files for bankruptcy to reduce its risk. For example, a creditor can eliminate the threat of preference liability by insisting on payment in advance or C.O.D. terms. Where circumstances do not allow for payment in advance, a diligent creditor still can significantly reduce its risk by monitoring its receivables and communicating regularly with troubled customers.

Ideally, companies will want to implement procedures to reduce bankruptcy-related threats and to resolve such claims quickly and as satisfactorily as possible. When litigation is unavoidable, we find that companies who have been diligent with customer collections are in the best position to defend against trustee claims and are often able to resolve their disputes by agreement.

The Taylor English Creditors’ Rights and Bankruptcy team will continue to keep close tabs on significant developments.


bankruptcy, preference avoidance, preference claims, trustee, rezac_john, insights