Map watermark

Bankruptcy Litigation

Bankruptcy litigation consists of causes of action pursued largely by the fiduciaries for the benefit of creditors of the bankrupt debtor. These causes of action are brought as separate “adversary proceedings” filed in the debtor’s bankruptcy case. When any company (or individual) files for bankruptcy protection, one of the main goals of the United States Bankruptcy Code is to ensure that the creditors of the debtor (the entities that are owed money by the company or individual filing bankruptcy) are treated fairly; and that whatever loss the creditors must suffer as a result of the bankruptcy process be minimized. This leads to fiduciaries filing bankruptcy litigation actions to supply money back to the creditors.

Our firm defenses hundreds of bankruptcy litigation actions each year. One of the most common types of cases are:

PREFERENCE ACTION (11 U.S.C. section 547(b))

A preference action is the most common claim pursued through bankruptcy litigation. 11 U.S.C. section 547(b) of the United States Bankruptcy Code allows the fiduciary to explore whether payments made by the debtor in the ninety (90) days prior to the bankruptcy (to entities that were owed such payments for consideration provided to the debtor) were made preferentially to the recipient and to the detriment of other creditors at large who were owed money during the same 90 period but who were not paid and as a result are now creditors of the debtor. It is important to note that a preference lawsuit is not challenging the recipient’s right to receive the payment in the sense that it was not owed to the recipient. The fiduciary will almost always concede that the recipient performed valuable services for the debtor. The challenge is to the timing of the payment – hence the term “preference”.

Essentially, if a fiduciary can show that a payment was received on account of an outstanding invoice in the 90 days before the debtor’s bankruptcy and such payment allowed the recipient to receive more than what they otherwise would have received had the payment not been made and the recipient had been made to recover through a hypothetical liquidation of the debtor, the fiduciary can pursue the recovery of the payment. Obviously, the standard the fiduciary must meet to pursue this case is low. That is why you see these cases being brought the most, as there is a low burden to file the case. But this is where the advantages to the fiduciary ends and the party being sued or pursued can come forward and raise substantial defenses. Unfortunately, the defendant typically has been sued in court and must now raise their defenses through the litigation process in a Federal Bankruptcy Court (typically in a foreign jurisdiction).

The most common defenses a defendant can raise to a preference demand are the “subsequent new value” defense or the “ordinary course of business” defense. These defenses can be explained in a much more thorough manner during a phone consultation. Such courtesy phone consultation can be scheduled by clicking here.



Our attorneys have defended preference actions in most federal jurisdictions throughout the country. A significant portion of that work has been performed in bankruptcy courts located in Delaware, New York, New Jersey, Pennsylvania, Virginia, Texas, Illinois and California. Often, we notice that the same counsel represents the fiduciaries pursuing the cases. The law firms of ASK LLP, Fox Rothschild, Pachulski Stang, Freeborn & Peters and several other firms are common counsel to fiduciaries. Naturally, we routinely oppose these firms.

A sample of the vast list of bankruptcy cases where we have defended preference actions in can be accessed by clicking here.


From the initial free consultation to resolution, we have 2 goals in mind and they are both designed to minimize the economic impact of the suit on the client. We want to minimize the amount a client returns to the fiduciary, if any; while at the same time we want to minimize legal defense fees by engaging in strategies designed to achieve substantial result in an expeditious manner. Above all we want to provide as much predictability and transparency to the process at the outset.

If you have been sued or have received a demand letter asserting a claim to recover funds in a bankruptcy case, we encourage you to click here and immediately set up a free consultation with one of our seasoned attorneys.

Open for businesses

Call Now Button