Legal Question in Bankruptcy in Illinois

Pre-Petition Payment Refund Demands

I own a manufacturing company servicing the steel industry. Several of mycustomers filed chapter 11 in the last 3 years. Anything i shipped and wasn't paid was held up in the bankruptcy courts and most likely will be paid pennies on the dollar. Now several of these customers have sued me for payments they made to me 90 days before they filed chapter 11 claiming preferential payments and that actually they were insolvent then and shouldn.t have made payments to me. What is the law regarding this and where is it referenced? Thanks


Asked on 3/21/04, 9:46 pm

2 Answers from Attorneys
Frank Rozanc Frank J. Rozanc, Esq.

Re: Pre-Petition Payment Refund Demands

I believe that the applicable law is 11 USC Sec. 526, and you may have a defense if the payments were made in the ordinary course of business.

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Answered on 3/22/04, 2:17 am
Charles Dobra Charles Wm. Dobra, Ltd.

Re: Pre-Petition Payment Refund Demands

GENERALLY, you have to pay to the Trustee. There are SOME defenses, but not many. BUT, you may be able to negotiate with the Trustee.

I know that this sounds foreign to someone who does not practice Bankruptcy law on a frequent basis. "Preferences" is a world all its own in the Bankruptcy world.

You don't say where you are located, so I would respectfully, and strongly, suggest that you consult a BANKRUPTCY PRACTITIONER in your locale AS SOON AS POSSIBLE!

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Answered on 3/22/04, 9:27 am


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