New York Commercial Collections Attorney Blog: Will You Need to Refund Your Customer’s Payment When They File Bankruptcy?

Alert from your New York commercial collections attorney: If your customer pays you and files for bankruptcy within 90 days of making the payment, you may have to return the monies to become part of the debtor’s estate.

FFGN has a case study wherein after starting legal action our client agreed to accept monthly payments in installments from their former customer. Our client accepted the installments because the debtor had no way to pay the balances demanded in the lawsuit in one lump sum payment. After receiving three installments totaling $63,000.00, we were notified that the debtor filed for bankruptcy. The monies paid within the 90 days of the bankruptcy filing were considered a “preference payment.” The trustee sought Court intervention to demand the monies be returned.

“Preference payment” was established to prevent businesses from favoring one creditor over another. While this is not an absolute rule, it will hopefully inspire you to act quickly. If your customer owes you money, and they are still in business, get paid now. You don’t want to be caught within the 90 day mark with the potential to lose the money that is rightfully yours.

For questions regarding “preference payments,” commercial debt collection laws, or to submit a claim, call this NYC commercial collections attorney at (212) 686-0100 or email jnager@ffgnesqs.com.

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