Many creditors (including lenders) have learned the difficult lesson that payments received from a debtor within the 90-day period preceding a bankruptcy filing may be subject to refund as a preferential transfer. Many creditors also know that one of the defenses to a preferential transfer claim is what is referred to as an "ordinary course of business" defense, which excludes payments that are made within the ordinary course of dealing with the creditor and that are consistent with the ordinary practice in the industry.

But what happens when a debtor in a new lending relationship is forced to file bankruptcy early in the credit relationship, possibly even after only one payment has been made? Is that creditor out of luck on the "ordinary course" defense? Not necessarily, says the Tenth Circuit Court of Appeals. The court of appeals decision, which is described at the Stinson Leonard Street Bankruptcy Blog, provides details on why this case is significant for creditors and lenders, and why good fact development is critical in formulating a preferential transfer defense.