*This article was co-authored by former Lowenstein summer associate Samantha Caraballo.

This article focuses on the Objective Prong, which was addressed by the Bankruptcy Court for the District of Delaware (the “Court”) in FI Liquidating Trust v. C.H. Robinson Company, Inc. (In re Fred’s Inc.). In In re Fred’s Inc., the Court held that the Objective Prong is unavailable as a defense to a preference claim where a creditor applies pressure to extract payment from a debtor. Unlike the Subjective Prong, where there is a significant body of case law holding that collection pressure may result in an otherwise ordinary payment (from a timing perspective) no longer being “ordinary,” there is a dearth of case law, especially in the Third Circuit where Delaware is located, addressing the impact of the same types of pressure on the Objective Prong.

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