How to deal with preferential transfer claims in bankruptcy?

In other words, the payment by the debtor must have been in satisfaction of an old or preexisting debt owed by the debtor to the creditor, as opposed to a current obligation. The transfer must be made within ninety (90) days of the date on which the debtor files its bankruptcy petition.

When is a transfer of a property preferential?

Of an interest of the debtor in property – a transfer is preferential only if the property transferred belongs to the debtor.

What was the severance agreement with new Sears?

As part of the transaction, New Sears committed to offer severance to eligible associates on the same terms as were available historically (which are more favorable than the severance plan that Old Sears offered during the bankruptcy).

Why did Sears Holdings file for Ch 11?

In order to squeeze out more cash to pay priority administrative claims, Sears launched an aggressive scheme to send out section 547 “demand letters” to certain vendors that were paid within 90 days of filing for Ch.11. (July 17, 2018, to October 15, 2018). Sears is trying to recover “preferential transfers” that were made to vendors and others.

When is a payment considered a preference transfer?

Accordingly, payments (or transfers) made within 90 days of a bankruptcy filing, on account of an antecedent debt, while the debtor was insolvent, and which allow the creditor to receive more than it would have had the transfer not been made and the debtor were liquidated under Chapter 7, are regarded as preferential transfers.

In order to squeeze out more cash to pay priority administrative claims, Sears launched an aggressive scheme to send out section 547 “demand letters” to certain vendors that were paid within 90 days of filing for Ch.11. (July 17, 2018, to October 15, 2018). Sears is trying to recover “preferential transfers” that were made to vendors and others.

Of an interest of the debtor in property – a transfer is preferential only if the property transferred belongs to the debtor.

Can a creditor defend against a preference claim?

Pursuant to Section 547 (c) (2) of the Bankruptcy Code, a creditor may also attempt to defend against a preference claim on the basis that the payments it received from the debtor were made in the ordinary course of business.