Hancock Fabrics, Inc. – Preference Defense Lawyer

Between January 31, 2018 and February 1, 2018, Hancock Fabrics, Inc. filed approximately 68 complaints seeking to avoid and recover alleged preferential and/or fraudulent transfers pursuant to Sections 547, 548, and 550 of the United States Bankruptcy Code.

Procedural History:

On February 2, 2016 (the “Petition Date”), each Debtor commenced a Bankruptcy case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code.

The Debtors in those Chapter 11 cases were: Hancock Fabrics, Inc.; Hancock Fabrics, LLC; Hancock Fabrics of MI, Inc.; hancockfabrics.com, Inc.; HF Enterprises, Inc.; HF Merchandising, Inc.; and HF Resources, Inc.

On February 3, 2016, the Court entered an order authorizing the joint administration of the chapter 11 cases for procedural purposes only.

On October 16, 2017, the Court entered an order closing the cases of certain affiliated debtors’ cases, leaving only Hancock Fabrics, Inc.’s case open.

These adversary actions are before the Honorable Brendan L. Shannon.

Background, as alleged by Plaintiff:

“the Debtors were one of the largest fabric retailers in the United States of America. The Debtors operated as a national specialty retailer which offered an extensive selection of high-quality fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines, along with in-store sewing advice.”

Common Defenses in Preference Actions

The United States Bankruptcy Code provides many affirmative defenses to preference actions, contained within Section 547(c). For example, the most common defenses that may be available to a Defendant under Section 547(c) may include:

• the transfer was a contemporaneous exchange for new value given to the debtor (i.e., the debtor received something of value in exchange for the transfer); 11 U.S.C. §547(c)(1);
• after such transfer, Defendant gave new value to or for the benefit of the debtor (i.e., the Defendant extended additional credit to the Debtor after receiving the transfer) 11 U.S.C. §547(c)(4); or
• the transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the recipient (i.e., Defendant made the transfer under ordinary business terms). 11 U.S.C. §547(c)(2).

For more information, see our page on Preference Defense Litigation: http://www.tobialaw.com/practice-areas/delaware-preference-defense-lawyer/

If you conducted business with Hancock Fabrics, Inc. or any of the Debtors and especially if you have received a demand letter or a complaint or if a complaint has been filed but not yet served against you or your business, contact us here, email us at info@tobialaw.com or call the firm’s Wilmington offices directly at (302) 655-5303 to schedule an initial consultation. We can discuss the situation and share with you our initial observations at no charge.