A customer declaring bankruptcy can have serious implications for transportation and logistics companies. Before 2018, a bankruptcy trustee could routinely “claw-back” payments made by a customer within 90 days of the customer’s bankruptcy filing. This left transportation and logistics companies with little hope of retaining payments received in those 90 days before bankruptcy. But in August 2018, an 11th Circuit Court case clarified the right to use a powerful “new-value” defense against bankruptcy preference claims.
The “new-value” defense under §547(c)(4) of the bankruptcy code prohibits a trustee from collecting payment made to a creditor if, after the transfer, the creditor responded by giving new value to the debtor. This defense is often available to creditors who can show a revolving series of credit extensions and payments, which is common for transportation and logistics companies.
But some earlier 11th Circuit cases confused and muddled the strength of the “new-value” defense by suggesting that a creditor’s “new value”—or additional services supplied to the customer—had to remain unpaid during the 90 days prior to bankruptcy filing in order to be a valid defense. No longer. Recently, the 11th Circuit Court case of BFW Liquidation v. Blue Bell Creameries, Inc. clarified that the “new value” need not remain unpaid. As a result of this favorable case, transportation and logistics companies can now assert the “new-value” defense, even if their extensions of credit were paid within 90 days of the customer’s bankruptcy filing.
While a useful tool in the creditor’s toolbox, the “new-value” defense is just one defense available to creditors facing a bankruptcy preference claim. Defenses such as “ordinary course business” and “contemporaneous exchange” are also powerful defenses. But for any of these defenses to apply, the transportation or logistics company must prove them in court. While this burden is usually not difficult to satisfy, timing is crucial. Utilizing the aid of an experienced attorney will help ensure that your defense is timely and properly advanced.
At Mitchell-Handschuh Law Group, our attorneys assist transportation and logistics clients with all aspects of bankruptcy preference claims, in addition to providing a comprehensive range of legal services. We welcome inquiries about our transportation claims and litigation practice, as well as our other legal services for transportation companies.
If you have been served with a lawsuit and are concerned about filing deadlines, please feel free to contact us by calling (404) 262-9488 or by using our online contact form. We will be happy to discuss your case and assist you to ensure that you have your day in court.
Our attorneys assist clients with legal matters in the Atlanta Metro area, throughout the State of Georgia, and across the country.