Why the demand figure is a starting point
Preference demands are often sent in batches, based on a list of payments made during a set period before the filing, and the first number in the letter frequently ignores defenses. The trustee is expected to make a reasonable inquiry into a recipient's known or reasonably knowable defenses before suing, which gives recipients a reason to put their defenses forward early. Smaller demands may also have to be brought in the court where the defendant is located rather than where the bankruptcy is pending. The debtor is presumed insolvent during the ordinary preference period, but that presumption can be rebutted with evidence. Bankruptcy preference defenses are fact-heavy and rest on payment records rather than on how the relationship felt.
The defenses raised most often
The ordinary course defense asks whether the payments looked like the parties' usual dealings or like normal terms in the industry, so payment timing before and during the period matters. The new value defense credits goods or services you delivered after receiving a payment, to the extent they were not themselves paid for. Other defenses exist, and some apply only in particular situations, such as payments that were meant as an exchange for something delivered at the same time. These defenses can overlap, and the exposure often looks quite different once invoice-level data is laid out. Some recipients also dispute whether the money came from the debtor's property at all.
Building the response
We start with an invoice-by-invoice history of the relationship, reaching back well before the preference period so there is a baseline to compare. Gather invoices, payment dates and methods, credit terms, any changes in terms or collection pressure, shipping records, and correspondence about late payments. Collection calls, credit holds, or new payment demands near the end of the relationship can undercut an ordinary course argument, so those facts need to be faced early. In a first conversation we estimate the defensible amount and decide whether to answer with a defense package, negotiate, or prepare to litigate in an adversary proceeding.
