On January 19, 2013, Lyon Workspace Products, L.L.C., and its affiliates and subsidiaries, filed for Chapter 11 bankruptcy protection under case number 13-02100.  On May 20, 2014, the bankruptcy court approved the debtors’ joint liquidation plan.  Part of the plan’s assets included the right to file actions under chapter 5 of the Bankruptcy Code, namely, preferential avoidance complaints under 11 U.S.C. Sec. 547(b).  This power is held by the Liquidating Trustee.

Under Section 547(b), payments made by debtors to creditors on account of antecedent debts and made within 90 days of the bankruptcy petition being filed are presumed to be avoidable as “preferential transfers.”  This presumption can be rebutted, however, by taking advantage of one or more statutory defenses outlined in Section 547(c).

On August 27, 2014, the Liquidating Trustee filed its first complaints against the debtors’ various creditors seeking to recover preferential transfers.  The Liquidating Trustee typically sends demand letters prior to filing suit hoping to settle the case short of litigation.  Once litigation starts, the Liquidating Trustee still can compromise its claim with the creditor.