The ordinary course of business defense to a preference claim: The case of the excruciatingly late payment. (Business Law).(Laclede Steel Co.)

Business Credit, April, 2002 by Nathan, Bruce S.

Introduction

Credit grantors dread receiving a demand letter from a bankruptcy trustee or Chapter 11 debtor-in-possession for the repayment of a preference. To add insult to injury, credit grantors must usually deal with a demand to pay back the hard gotten gains of a vigorous and possibly time-consuming collection effort after having previously written off substantial amounts due from an insolvent customer.

But creditors should not fret--there are multiple defenses that may be available to minimize and possibly eliminate exposure on a preference claim. One of the most frequently litigated defenses to a preference claim is the ordinary course of business defense. Most courts have applied the ordinary course of business defense to late payments...