Expert: Mark J. Markus- California Bankruptcy Attorney - 2/17/2011

Question
why is it so difficult to prevail using the ordinary course of business defense, especially when your records should seemingly be able to pass both the subjective and objective tests?

Answer
That is a great question and I've asked it myself.  I think the problem lies in the fact that ordinary course is almost never a certainty because you have to prove payments made in the preference period were the same (or substantially so) as they were prior to then.  My typical client in this regard was paid by a debtor on multiple invoices with one payment, so establishing how many days passed between each invoice and payment is an impossibility.  You end up with all of these different time periods compared to those in the preference period and it's always just a matter of argument.  My point is that there's no dead bang for sure winner.  It's always up to the judge.  Trustees know this, and so they very rarely settle these matters, or if they do, it's not for what might be deemed a fair amount.   Also, it doesn't cost the Trustee any more to litigate any one case, because these preference actions are usually brought in bulk (often hundreds of different claims) so they simply have no incentive to settle for a low amount.

The best way to prevail is get all the evidence and push it to trial.  Unfortunately, that can be expensive.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/