When the demand turns into a lawsuit
A preference action is a lawsuit filed inside the bankruptcy case, called an adversary proceeding, and it has its own answer deadline that should be calendared as soon as the complaint is served. The trustee carries the burden on the basic claim, including that the payments were on an old debt and gave you more than a liquidation would have. The debtor is presumed insolvent during the ordinary lookback period, but that presumption can be rebutted with evidence. Before suing, a trustee is expected to exercise reasonable due diligence that accounts for defenses it knew or reasonably could have known about, and a complaint filed without that work can be challenged. The amount claimed can also affect which court may hear the case, and the trustee faces its own limitation period for bringing it.
Defenses that carry these cases
The ordinary course of business defense protects payments made consistently with the history between the parties or with normal terms in the industry, so a customer that always paid at a steady pace looks different from one that suddenly paid off an old balance under pressure. The new value defenses look at whether you gave something back, either in a contemporaneous exchange or afterward by shipping goods or providing services on credit. Other defenses apply in narrower situations, including certain secured and small transfers. Collection pressure, changed credit terms, or payments made after a threat to stop shipping tend to weaken the ordinary course argument. Each defense is fact-driven, which is why the records matter more than the theory.
Proving it with your records
Payment history reaching well back before the lookback period sets the baseline for the ordinary course defense, so pull invoices with issue dates, payment dates, amounts, and the contract or credit terms in force. Shipping and delivery records after each payment support new value. Emails about overdue balances or credit holds can cut either way, so collect them without editing anything. Insolvency challenges may call for a retained financial analyst. Many bankruptcy courts send preference cases to mediation, which makes a well-organized defense valuable well before trial. Our first review compares your records with the trustee's numbers and sets out where the defenses are strongest and what each would take to prove.
