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Customer filed Chapter 11

HI, We have a customer who filed chapter 11. However they just recently paid us for prepetition invoices. Can they clawback this payment? Customer we are billing is in NY the project is in OH which we did file a lien.

1 reply

Jun 19, 2020

Any time payments are made within the 90 days before filing bankruptcy, there's a chance that the payment might be subject to clawback. Generally, as long as the payments were made in the ordinary course of business or according to the terms of the agreement between the parties, the chances of a clawback will be reduced. But, if the payments look like a last-ditch effort, or if it's obvious the bankrupt party was giving preferential treatment to you, then the chances of a clawback would be heightened. With that being said, it'd probably be wise to consult a local bankruptcy attorney for more clarity. They'll have more experience with clawbacks than I do. Finally, I think these articles should be useful: - How to Protect Your Payments When Dealing with a Construction Bankruptcy | Levelset - Strategies for Avoiding the Headache of Preference Liability | Duane Morris - Payments Made to Creditors Before Bankruptcy: Can the Trustee Get the Money Back?

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