Bankruptcy and Insolvency
For healthy clients, one of the most common bankruptcy problems is a preference lawsuit. Invariably, such cases are viewed as "unfair", because not only has a client lost money to a failed customer, but is now faced with a legal demand to pay back an amount that can be small or very substantial. In these suits, the bankruptcy trustee, or another surrogate for the debtor, sues to "claw back" into the bankruptcy estate money paid within 90 days before the bankruptcy filing date. Defenses such as new value, ordinary course of business or a statutory lien greatly improve the chances for a successful outcome. Knowledge of the statutory defenses, and a vigorous defense of these cases is required.
Similar to preference claims but based on other legal principles, fraudulent conveyance claims seek to recover an asset was allegedly transferred without fair consideration when the debtor was insolvent. Aggressive trustees can use state law to review up to 6 years of transactions to find such claims.
Many other issues are litigated within the bankruptcy case itself, for example, assumption and assignment of real property leases, rejection of executory contracts, motions to lift stay to recover collateral due to its declining value during bankruptcy, and related adequate protection issues. For secured lender clients, we assist with reaffirmation agreements and recovery of collateral, which have become a common by-product of the lending business in a tight economy.
Clients may have other legal means to minimize the impact of a customer or supplier bankruptcy, through statutory liens, such as construction liens and special tool or molders' liens. State law sometimes protects certain types of bankruptcy creditors. Such laws provide an opportunity to recover either money or property from the bankrupt debtor, as long as aggressive efforts are made to do so.
In cases where the debtor is the supplier to the client rather than the customer, litigation may be required to assure an uninterrupted supply chain, or to obtain tooling or machinery critical to the client's business. Intensive review of supply chain contracts is required as soon as possible when the client's supply chain is threatened.
Occasionally, a client is affected by a bankruptcy debtor's fraudulent conduct, or other wrongful actions, such swearing to a false personal financial statement, or making misrepresentations in the bankruptcy schedules. The law allows a creditor to sue the debtor to ask the court to declare the amounts due the creditor--or in some cases all amounts due all creditors--are non-dischargeable debts. If the suit is successful, the creditor can continue its collection efforts against the debtor despite the bankruptcy. However, such suits must be brought very soon after a bankruptcy is filed, as there is a 60 day statute of limitations.
The Kotz Sangster litigation team has decades of bankruptcy litigation experience to assist your needs, and to assure the best possible outcome when faced with "unfair" bankruptcy problems.
