{"id":9904,"date":"2019-05-13T23:05:58","date_gmt":"2019-05-13T23:05:58","guid":{"rendered":"https:\/\/nybankruptcy.net\/main\/?p=9904"},"modified":"2019-05-13T23:06:02","modified_gmt":"2019-05-13T23:06:02","slug":"preference-actions-what-is-the-contemporaneous-exchange-defense-2","status":"publish","type":"post","link":"https:\/\/nybankruptcy.net\/main\/preference-actions-what-is-the-contemporaneous-exchange-defense-2\/","title":{"rendered":"Preference Actions: What is the “contemporaneous exchange” defense?"},"content":{"rendered":"

\"goods-exchange\"In a previous post (\u201cDefenses to Preference Actions \u2013 Part I<\/a>\u201c), I explained that there are three common defenses to preference actions<\/a> (also often called \u201cpreference lawsuits\u201d) that you can use if you\u2019ve received a demand letter from a bankruptcy trustee, from counsel to a Debtor-In-Possession or counsel to a creditors committee.<\/p>\n

In a subsequent post I explained the “Ordinary Course of Business” Defense<\/a><\/strong>.\u00a0 Next I’ll explain the…<\/p>\n

“Contemporaneous Exchange” Defense<\/h3>\n

The “Contemporaneous Exchange” Defense<\/strong> (also sometimes referred as the “Contemporaneous Exchange for New Value” Defense<\/strong>, but not to be confused with the “New Value” Defense<\/strong>), simply means that in the debtor paid money to you in exchange for something of value.<\/p>\n

For example, if you delivered goods to the debtor, and right then and there the debtor paid you for those goods, then that would be a contemporaneous exchange for new value.\u00a0 If a trustee pursued a preference action against you for that transaction, then you would likely be successful employing the “Contemporaneous Exchange Defense.”<\/p>\n

Of course, the devil is in the details and the facts of a particular situation are the key to a successful or unsuccessful defense.<\/p>\n

Timing, for example, is an important element.\u00a0 If you deliver goods or perform a service for the debtor without receiving payment, and then a month later you get the debtor to pay what they owe you, you have a much weaker “contemporaneous exchange” defense.\u00a0 Why?\u00a0 Because the exchange was not contemporaneous.<\/p>\n

Getting into the nitty gritty a bit, there was a big court decision in 2007 that revolved around the issue of credit transactions.\u00a0 (Hechinger Investment Company of Delaware, Inc. v. Universal Forest Products, Inc. 489 F.3d 568 (3d Cir. 2007)<\/em>)\u00a0 And the court decided that even in the instance of a credit transaction–in other words, where there’s a delay between the transaction for goods and the actual payment for those goods–it can still be valid to invoke the “contemporaneous exchange” defense.<\/p>\n

The main takeaway for any creditor involved in transactions such as these is to be aware that trustees can pursue preference actions against you, even for seemingly valid and legitimate transactions.\u00a0 However, you also have some good defenses at your disposal.<\/p>\n

The key to defending yourself is to have an experienced bankruptcy lawyer, particularly one who knows the ins and outs of preference actions.<\/p>\n

Our experience both representing trustees and representing creditors against trustees gives us unique perspective on how to help our clients deal with preference actions.<\/p>\n

If you’re facing a preference action in New York and need a skilled and experienced lawyer to help you navigate, please contact me<\/a> for a free initial consultation.<\/p>\n

Go to\u00a0bankruptcy attorney Brooklyn NY<\/span><\/a><\/em>\u00a0t<\/em>o learn more about Rosenberg Musso & Weiner LLP<\/strong><\/a> and\/or to set up a free consultation.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In a previous post (\u201cDefenses to Preference Actions \u2013 Part I\u201c), I explained that there are three common defenses to preference actions (also often called \u201cpreference lawsuits\u201d) that you can use if you\u2019ve received a demand letter from a bankruptcy trustee, from counsel to a Debtor-In-Possession or counsel to a creditors committee. In a subsequent …<\/p>\n

Preference Actions: What is the “contemporaneous exchange” defense?<\/span> Read More \u00bb<\/a><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[16,22,31,7,58,36],"tags":[2,21,71,29,30,57,59,37,38,39],"acf":[],"yoast_head":"\nPreference Actions: What is the "contemporaneous exchange" defense?<\/title>\n<meta name=\"description\" content=\"In a previous post 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