Did you do business with Orleans Homebuilders prior to their bankruptcy filing? Have you received a demand for return of alleged preferential payments? In a recent submission to the Delaware Bankruptcy Court, local developer Orleans Homebuilders stated that it intends to file as many as 400 suits to recover preferential transfers.
As previously summarized on this blog, the Bankruptcy Code allows a debtor to recover payments made during the 90 days before a bankruptcy filing, which is referred to as the preference period. Regardless of whether your business was rightfully entitled to receive the payments, the Bankruptcy Code may require your company to return funds received during the preference period. There are, however, several defenses to preference suits (for a refresher on preferences, see post here). In a procedures order submitted to the Delaware Bankruptcy Court, Orleans proposes an early mediation process to resolve matters where suit is filed.
Orleans has already begun the process of sending demand letters to parties who received payment during the preference period. Do not ignore letters demanding return of the preferential transfers or threatening suit for recovery of a preferential transfers - often times these matters can be resolved before a lawsuit is filed.