By definition, all of these payments were in the ordinary course of business.Similarly, the creditor that always preserved and enforced mechanic's lien and bond rights are more likely to collect after bankruptcy will have better defenses against preference actions for moneys received before bankruptcy.
If you still had mechanic's lien and bond rights at the time of pre bankruptcy payments, you will also have much better defenses to any preference action.
If a creditor is concerned with insolvency, they can refuse to deliver on any project that does not have good payment bond or mechanic's lien rights.
Payment bond rights are probably the best and most efficient mechanism to enforce payment.
Appendix 39: Bankruptcy Checklist Appendix 40: Notice of Bankruptcy Appendix 41: Bankruptcy Proof of Claim Appendix 42: Request for Service of Notices This outline is intended to introduce construction contractors, suppliers and other commercial creditors to some of the issues and concepts in bankruptcy law.
This is not a comprehensive explanation of bankruptcy and will not deal at all with many issues.
We have generalized and simplified many legal concepts, so that the explanations are short, uncluttered and easily understandable.
Every set of facts and circumstances raise different legal issues.
You should consult this firm or another attorney in dealing with any specific problem.
If you deal with bankruptcy cases regularly, you will come to the conclusion that a creditor avoids bankruptcy preference problems by using the same techniques good credit managers already use to avoid collection problems.
Good preference defenses are just an extra-added bonus for good credit management.
The creditor that consistently forced the debtor to stay on terms will have a smaller receivable to lose in bankruptcy and also will not have preference problems.