Credit professionals have long been frustrated by preference claims that feel more like leverage for nuisance settlements than efforts to promote fairness among creditors, as congress intended. The way preference claims are often weaponized in bankruptcy cases is anything but fair.
Debtors, trustees and other estate representatives will often assert preference claims, indiscriminately, against virtually every one of the debtor’s prepetition creditors without thoroughly considering the merits of such claims. Adding insult to injury, this scattershot approach to pursuing preference claims is often undertaken to fund payment of secured and administrative expense claims, not the general unsecured claims held by the creditors that are the targets of these claims.
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