Delaware Bankruptcy

On March 28, 2014, AFA Investment Inc. filed approximately 125 complaints seeking to avoid and recover alleged preferential transfers pursuant to Sections 547 and 550 of the Bankruptcy Code, to disallow claims of the defendants pursuant to Section 502(d), and seeking attorneys’ fees.  AFA Investment Inc., and various affiliated entities (the “Debtors”) filed petitions for bankruptcy in the District of Delaware on April 2, 2012.

In this prior post, a discussion was provided in connection with requiring a company to prepay for its goods or services in order to limit potential preferential exposure.

One question that clients often ask is what measures can be taken to reduce preferential exposure when dealing with a company that is sliding into financial insolvency.  Under Section 547 of the Bankruptcy Code, a debtor or trustee can seek to avoid and recover payments made to a vendor that provided goods or services to the debtor in the 90 days prior to the filing of bankruptcy.

In the Optim Energy, LLC bankruptcy proceeding, the 341 Meeting of Creditors has been scheduled for March 18, 2014.  The Section 341 Meeting will be held at the J. Caleb Boggs Federal Building, 844 King Street, Room 5209, Wilmington, DE 19801, at 1:00 p.m.  Click here for a copy of this notice.

It’s your worst nightmare: you provided goods and services to a financially struggling company, only to find out that it filed for bankruptcy, leaving your company with a large unpaid balance.  Worst yet, after the debtor filed for bankruptcy, you receive a demand letter in the mail threatening a lawsuit if you do not return payments that you received from the debtor, even though you earned that money by providing goods or services to that entity.  What sense does that make?