Minnesota Bankruptcy Preference Defense
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Minnesota Bankruptcy Preference Defense

If you have been sued by a Minnesota Bankruptcy Trustee for a preference it is important that you get legal advice before you respond to the complaint. In most cases you will have a deadline of 30 days from the date the Summons and Complaint was issued by the Minnesota Bankruptcy Court to respond to the lawsuit.


A bankruptcy preference is a tool used to ensure that all the creditors of a debtor are treated equally. The rules regarding preferences vary depending upon the type of payment the debtor made before the bankruptcy filing. If a debtor makes a payment to an insider the trustee can look back at least one year to recover payments made to the insider. If the debtor makes payments to non insiders the preference period is 90 days before the bankruptcy is filed for pre existing debt.


In Minnesota the most common statues used to justify a bankruptcy preference action are 11 U.S.C. ยงยง 544, 547, 548, 549, and claims under the Minnesota Fraudulent Conveyance Act. These statues give bankruptcy trustee and debtors in possession the ability to recover money from a wide range of individuals and business. It is common to get a lawsuit if the company you worked for goes into chapter 7 bankruptcy, or if you are a vendor of a company that enters files for chapter 7 bankruptcy.


If you get sued for a preference action you may have defenses available to you to prevent the Trustee from recovering funds for the bankruptcy estate. The first main defense is the ordinary course of business defense. This defense is available if you have made regular payments on an account and those payments are current when the bankruptcy is filed. The other common defenses are is contemporaneous exchange for new value, and subsequent new value.


These defenses are meant to protect individuals or corporations who have been hit with preference lawsuits. If you have any of the above issues contact our office for more information regarding these lawsuits.