It’s inevitable dear readers that the recent spate of high profile bankruptcies will result in many of you receiving the dreaded letter demanding that you return payments made by the debtor for delivered goods. We’ll discuss a recent change in the law that favors creditors and some suggested safeguards.

What it is. Most of us are aware that the Bankruptcy Code allows a debtor to recover “preference” payments made by the debtor (1) on account of antecedent debt (rather than current debt), (2) while the debtor is insolvent, (3) within 90 days of the filing of bankruptcy (and within one year if the creditor is an insider), and (4) that allows the creditor to receive more than it would have received if the payment was made in a bankruptcy proceeding (i.e...Read More

In today’s market where even long standing establishments are in distress and potentially unable to pay for merchandise delivered, manufacturers/sellers are seeking every available means to safeguard against financial loss. In this uncertain environment, reclamation (or the right to demand the return of merchandise), has gained new respect and urgency. Faithful readers, let me know if you have been exposed to this remedy (making a demand or receiving one) and the results achieved.

Reclamation before bankruptcy: Before a buyer files for bankruptcy a seller’s reclamation right is governed by the Uniform Commercial Code Section 2-702. Under this statute a seller can reclaim merchandise that is delivered on credit to an “insolvent” buyer (as defined in the UCC)...Read More