Preference demands: preserve the trading history before discussing repayment

A preference claim is not the same as an accusation of fraud

Section 547 permits avoidance of certain transfers made before bankruptcy if the statutory elements are satisfied. Those elements concern matters including an interest of the debtor in property, an antecedent debt, insolvency, timing, and the creditor's hypothetical Chapter 7 position. A genuine invoice and an honest payment can still raise a preference question.

The familiar 90-day period is only one part of the analysis; insider transfers have additional treatment. A demand letter should identify the transactions and legal theory rather than merely total every payment near the filing. The statute also refers to reasonable due diligence and consideration of known or reasonably knowable affirmative defenses.

Defenses depend on transaction-level facts

Section 547(c) includes defenses involving contemporaneous exchange, ordinary-course payment, and subsequent new value, among others. Each has conditions. Describing a payment as normal or pointing to later business does not establish the full defense without examining those conditions.

Preserve a longer trading history, not just the challenged period. Invoice dates, receipt dates, agreed terms, actual payment timing, collection communications, credits, and later supplies can all help explain the relationship. Keep the underlying records so a spreadsheet can be checked.

Reconcile before taking a position

An illustrative vendor may discover that a demand counts a reversed payment, includes a transaction with another entity, or ignores later goods. Those discrepancies are reasons for a supported response, not a guarantee that nothing is owed. Legal analysis should distinguish defects in the claim from available affirmative defenses.

Track the difference between an informal demand, a settlement proposal, and a filed complaint. A negotiation does not automatically suspend a litigation deadline. Have counsel assess the evidence and procedural posture before committing to a repayment or broad release.

Prepare this material

• A transaction ledger tied to source documents.
• A baseline payment history and collection communications.
• Records of subsequent value and related payments.
• The demand, complaint if any, and all response dates.