Eric: I like to think of myself as a restructuring lawyer. Probably 75% of my work is with distressed companies helping them avoid bankruptcy, or with large creditors to minimize risk before a filing. I do represent companies and committees of creditors in bankruptcy as well. Certainly you are correct that the lawyers in the Madoff case did (and are doing) quite well. That’s not always the case, especially in smaller cases. My response is probably a bit of an overreaction to the way lawyers are viewed in the general public. Sorry. On the clawback issue, its not necessarily a securities versus goods issue. Payments made for goods cash in advance are not recoverable. Nor are COD payments for goods. Nor are payments made to a fully secured creditor. And there are many other examples. The reality is that Madoff, with which you seem to be most familiar, is a unique case and not really representative of the traditional “preference” situation. It is true that the preference law is broad…but it is not true that any funds can be clawed back (even potentially).
Mel - I sure wouldn’t but have no clue if those celeb promoted brands do good business or not. I certainly wouldn’t drink them!
Thanks for the info Sean. No offense towards lawyers intended. I hope to never need to learn more about BK law…
I’d never really thought of it in these terms before reading this thread, but I am currently paying as a result of a BK clawback that occurred 20 years ago.
A bankruptcy that I was not involved with in any capacity whatsoever. Talk about far reaching implications!
There is what the law says, as Sean explained, and then there’s the grubby, retail level of arguing, negotiating, etc. The facts are that a lot of claw back claims simply get ignored if they’re relatively small because the claim recipient knows that it will cost the estate more in legal fees than the amount of the claim to pursue it. And larger ones tend to get settled for less than the full amount. Both the creditor and the debtor need to consider their legal costs but remember that any money they collect goes into the pot to pay the other creditors.
In my painful experience this is not true. We required a risky customer to go COD and still got sued for all payments made in the six months before the filing.
At least all the players in the Bello Bankruptcy are in California. We were based in Georgia and had another customer in Illinois go bankrupt. We had made monthly shipments of goods to this customer like clockwork for more than ten years before the filing. We still got sued and we had to hire bankruptcy lawyers in both Gergia and Illinois. Our attorney fees were up to $50,000 when we decided to settle a $1.2 million claim for $75,000.
It wouldn’t take a genius to figure out what I think of bankruptcy lawyers.
Peter: I don’t know what to tell you. You either got bad advice or you misunderstood your counsel. A COD payment would never be recoverable. The statute requires “antecedent debt” so a simultaneous exchange of money and goods is not recoverable. Doesn’t mean someone won’t sue you for it, but it is always (really always) successfully defended. My guess is that the settlement was based on some payments that were not COD or you were taking money to apply to old debt in exchange for shipping the same value of goods on credit. In any event, bankruptcy lawyers are like doctors or social workers or cashiers. Some are good people, some or not, just like in every walk of life.
Right after the unsecured creditors sued many many equipment vendors, I attended a meeting of the Association of Winery Suppliers, which kind of functions as a credit bureau for companies like mine.
The basic question people had was: should I fight this thing or just offer 75% if what i will have to pay my lawyer??
Lots of people did that