What the claim is about
A preference claim seeks to recover payments or other transfers a debtor made to a creditor on an existing debt during a set period before the bankruptcy filing, a period that is longer when the recipient is an insider. The idea is to share the debtor's last resources among creditors rather than reward whoever was paid first. No wrongdoing by the recipient is required, and having been paid for real work does not by itself defeat the claim. A payment that left you no better off than you would have been in a Chapter 7 liquidation, such as one fully covered by your collateral, may fall outside the rule.
Who sends the demands and when
Claims are often pursued by a Chapter 7 trustee, a Chapter 11 debtor, or a trust created by a confirmed plan to pursue litigation for creditors. They can arrive well after the case began, because the deadline to sue is measured from the early stages of the case rather than from the payment, and trusts often work through many recipients at once. Many demands propose a discount for early settlement. A demand letter is not a lawsuit, but if it is ignored, a complaint in an adversary proceeding often follows.
Before you answer the letter
First confirm that the payments listed actually came from the debtor and actually reached you, and check whether you filed a proof of claim or have other dealings in the case. Compare the listed payments against your full payment history, because defenses often depend on patterns and on later shipments. If the debtor still owes you money, repaying a preference can add to your own claim in the case, which can figure into settlement. In a first conversation we review the letter, estimate the available defenses, and decide whether to respond with information, negotiate, or prepare for litigation.
