Bankruptcy Preference Demand Defense — Nationwide
Did you receive a preference demand letter from a bankruptcy trustee? You probably owe far less than they’re asking for — and you may owe nothing at all.
If a bankruptcy trustee or a trustee’s counsel has sent you a letter demanding repayment of money you received from a company that later filed bankruptcy — don’t panic, and don’t just pay it. These letters are sent in bulk to hundreds or thousands of creditors. They demand full repayment plus a small discount if you pay quickly. Most recipients overpay because they don’t know the law provides strong defenses that can eliminate or dramatically reduce the claim.
Call toll-free: (888) 275-2620 — available 24/7. Or email Docs@RonCookLawFirm.com.
The firm represents businesses and individuals against bankruptcy preference demands across the country. Preference law is federal — 11 U.S.C. § 547 — so the analysis is the same regardless of which state the underlying bankruptcy is filed in. Most preference demands resolve through correspondence without any court filing.
What Is a Preference Demand?
When a company files for bankruptcy, the bankruptcy trustee has the power under 11 U.S.C. § 547 to “avoid” — or claw back — certain payments the company made to creditors during the 90 days before the bankruptcy filing. These payments are called “preferential transfers.”
The theory is that a struggling company shouldn’t favor one creditor over another in the months before it goes under. In practice, the law captures ordinary business payments that were completely legitimate when they were made: payments for goods delivered, services rendered, rent paid, invoices honored.
Trustees hire law firms to send demand letters to every creditor who received payments during the 90-day window. These letters typically demand the full amount, offer a modest discount (usually 10–20%) for quick payment, and threaten a lawsuit if you don’t respond.
The demands look frightening. But the Bankruptcy Code provides multiple defenses, and most preference demands can be reduced significantly — or eliminated entirely.
Defenses That Can Reduce or Eliminate the Claim
The Bankruptcy Code provides several affirmative defenses under § 547(c). The trustee has the burden of proving the preference; you have the burden of proving the defenses. The most commonly applicable defenses:
Ordinary Course of Business — § 547(c)(2)
If the payments you received were consistent with the normal course of dealing between you and the debtor — same invoicing schedule, same payment timing, same payment method — those payments may be fully protected. Courts look at the actual payment history between the parties, not just what the contract says. A long, consistent track record of similar payments is the strongest version of this defense.
Subsequent New Value — § 547(c)(4)
If you continued providing goods or services to the debtor after receiving a challenged payment, and you weren’t paid for that later work, the unpaid value offsets your preference exposure dollar-for-dollar. This defense is especially powerful for service providers and vendors with ongoing relationships.
De Minimis Transfers — § 547(c)(9)
For non-consumer bankruptcy cases, individual transfers below the statutory threshold cannot be avoided at all. The threshold is $7,575 for cases filed between April 2022 and April 2025, and $8,575 for cases filed after April 2025 (the figures adjust for inflation every three years under § 104). If any single transfer falls below the threshold, it is independently protected — regardless of the total demand.
Contemporaneous Exchange for New Value — § 547(c)(1)
If you and the debtor intended the payment to be a contemporaneous exchange for new value — essentially a cash-on-delivery transaction — the payment is protected. The intent and the substantial contemporaneity of the exchange both have to be established.
Subsequent Advance Secured by Perfected Security Interest — § 547(c)(3)
If you provided new value (such as extending credit) after the transfer and before the bankruptcy filing, and that new value was secured by a security interest perfected on or before 30 days after the debtor received possession, the transfer may be protected. Most often relevant for secured lenders and equipment financers.
⚠️ Most preference demands can be defended.
In our experience, the majority of preference demands involve payments that are partially or fully protected by one or more of these defenses. Trustees know this — that’s why they offer a discount. But the discount they offer is almost always far higher than the actual exposure once defenses are applied.
Got a preference demand letter? Time matters.
Call (888) 275-2620 or email Docs@RonCookLawFirm.com
How the Defense Process Works
Initial Assessment
Send the demand letter and the trustee’s transfer schedule to the firm. After a brief review and a few targeted questions about your payment history and relationship with the debtor, you’ll receive an honest preliminary assessment of your exposure — usually within 24 to 48 hours.
Document Collection
If you decide to retain the firm, you’ll receive a structured intake spreadsheet that captures exactly what’s needed: invoice and payment history, any post-transfer goods or services you provided, and the key facts about your business relationship with the debtor. You fill it out, attach supporting documents, and send it back.
Defense Analysis and Response Letter
The firm analyzes your payment history, calculates your actual exposure after applying all available defenses, and drafts a comprehensive defense letter with a settlement offer calibrated to your real exposure — not the trustee’s inflated demand. The letter is built around documented facts, statutory citations, and exposure calculations the trustee’s counsel can verify.
Resolution
In most cases, the trustee accepts the offer or comes back with a reasonable counter. These matters typically resolve within 2 to 6 weeks of the initial response, at a fraction of the original demand.
A Recent Result
RECENT CASE
$24,225 demand — settled for $3,000.
A consulting firm received a preference demand for $24,225 from a Chapter 7 trustee represented by a major national law firm. The trustee offered to settle for $20,591 (a 15% discount). After analyzing the full payment history and identifying three separate defenses — ordinary course of business, subsequent new value, and the de minimis statutory threshold — the firm prepared a detailed defense letter with a settlement offer of $3,000. The trustee accepted. Total savings: over $21,000. Time from engagement to settlement: approximately two weeks.
Prior results do not guarantee future results. Each case turns on its specific facts and the documents available.
Why Work With This Firm on Preference Defense
Substantive bankruptcy credentials. Attorney Ronald S. Cook holds an LL.M. in Bankruptcy from St. John’s University School of Law and an LL.M. in Taxation from New York Law School, in addition to a J.D. and an MBA. Selected to the 2025–2026 New York Super Lawyers list, published by Thomson Reuters.
Nationwide practice on federal-law matters. Preference demands come from bankruptcy courts across the country, but you don’t need a local attorney to defend them. Most preference matters resolve through correspondence without any court appearance. The firm handles preference defense for clients in every state, with local counsel coordinated only if an adversary proceeding is filed (which is uncommon at typical demand levels).
Fast turnaround. Time matters — these letters come with deadlines. The firm typically delivers a finished defense letter within days of receiving your documents.
Documented defenses, not just negotiation. Trustees settle for less when they see a response that demonstrates specific knowledge of the defenses, cites the payment history with precision, and quantifies the exposure with documentation. A well-constructed defense letter changes the negotiation dynamic.
Frequently Asked Questions
I received a preference demand letter. Do I have to pay it?
No. A demand letter is not a court order. It’s the trustee’s opening position. You have the right to assert defenses and negotiate. Most demands significantly overstate actual exposure once the § 547(c) defenses are applied.
What happens if I ignore the letter?
The trustee may file an adversary proceeding (a lawsuit within the bankruptcy case) against you. Once that happens, your defense costs go up substantially. It is far better to respond early with a documented defense.
Can the trustee sue me personally?
The preference claim is against the entity that received the payment. If you received the payment through an LLC or corporation, the claim is generally against that entity. Personal liability could arise in limited circumstances — personal guaranties, improper distributions, or veil-piercing — but that is uncommon in typical preference cases.
I’m in one state and the bankruptcy is in another. Do I need a lawyer admitted there?
Generally no, for pre-litigation defense and settlement. Preference law is federal, and most preference demands resolve through correspondence without any court filing. If an adversary proceeding is filed, venue and local counsel issues may arise, but that is a bridge to cross only if needed — and it rarely is at typical demand levels.
Can I just pay the discounted amount they’re offering?
You can, but you would almost certainly be overpaying. The “discount” (typically 10–20% off) is designed to get you to pay quickly before you analyze the defenses. After applying the defenses, the actual exposure is usually far less than the discounted amount.
What if I already paid the trustee?
If you have already settled and paid, there is generally no way to recover that payment. If you have agreed to a settlement but have not paid yet, contact the firm immediately — it may not be too late to renegotiate.
What documents do I need?
The demand letter, the trustee’s transfer schedule, your invoices and payment records (ideally 12 or more months of history), any written contract or agreement with the debtor, and proof of payment for the transfers at issue. If you continued providing goods or services after the last challenged payment, records proving when that work was performed.
How long does this take?
From engagement to a finished defense letter, typically a few days once the documents arrive. From sending the response to settlement, typically 2 to 6 weeks depending on the trustee’s responsiveness.
What if the trustee rejects my settlement offer?
Trustees almost never reject a reasonable, documented offer outright. They typically counter. Continuing the negotiation is part of the engagement when the matter requires it.
I’m a small business and the amount they’re demanding would seriously hurt me. Does that matter?
It does not change the legal analysis, but it affects the settlement calculus. If your business has limited assets, the trustee has to weigh the cost of litigation against what they can realistically collect. A documented defense combined with limited collectability often produces favorable settlement results.
What does the defense cost?
Fees vary based on the number of transfers at issue, the length of the payment history, and the complexity of the underlying business relationship. The fee is determined and agreed in writing in the engagement letter before any work begins. The initial assessment of the demand letter is no charge.
Don’t Overpay on a Preference Demand
If you’ve received a preference demand letter, you have options. Most creditors who respond with a documented defense settle for a fraction of the demand. The sooner you respond, the stronger your position.
Call toll-free: (888) 275-2620. Available 24/7.
Email: Docs@RonCookLawFirm.com
Send the demand letter and the trustee’s transfer schedule with your initial inquiry; this allows for a meaningful preliminary assessment.
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Last reviewed by Attorney Ronald S. Cook — May 2026
This page is for informational purposes only and does not constitute legal advice. Preference defense outcomes depend on the specific facts of the matter, the documents available, the identity of the trustee and trustee’s counsel, and the underlying bankruptcy. Prior results do not guarantee future results.
