Defending an adversary proceeding to recover a preference.
The Chapter 7 Trustee has sued to recover money paid to you, on your past due bill, by the Debtor in the ninety days before the Debtor filed his bankruptcy. Even though you were paid on a legitimate debt the Trustee can recover this money so that it will available to pay a portion of the total amount owed to all creditors.
You can defeat the Trustee’s claim by showing that you were paid in “the ordinary course of business” or that you were paid C.O.D. or that you were paid on a secured debt. In addition, you can reduce the Trustee’s claim by the amount of goods that were shipped, but not paid for, during the period after the preference payment.
Trade Creditors and Sub Contractors have additional defenses.