Delaware Bankruptcy Litigation – Preference Defense, Relief from Stay, Motions Practice

Defense of Avoidance Actions including Preference Litigation and Fraudulent Transfer Litigation, and Bankruptcy Motions, Relief from Stay

If you are in business long enough, especially in these turbulent times, you will encounter customers or business providers that face insolvency and may determine that their only or best option is to file for bankruptcy protection under the United States Bankruptcy Code. This could be an important supplier or a major customer. Depending on how much of your business is tied to this other party, their performance and potential failure may have significant impact on your business. The other parties’ decision to pursue bankruptcy may have significant legal ramifications on how you deal with them going forward and with you operate your business. Or it may be little more than a nuisance that you simply want to take care of most efficiently, with the least cost, least effort or disruption to your business.

The Law Office of James Tobia, LLC represents parties in varying stages of litigation in the United States Bankruptcy Court for the District of Delaware, most frequently representing defendants, both small and large, in bankruptcy preference litigation, fraudulent transfer litigation and related avoidable transfer claims.

Among the most common needs our clients have are:

• Defense of avoidance actions
• Relief from stay• Objections to Debtor motions, such as for approval of a Plan or assumption, rejection or assignment of contracts or leases• Other Adversary Proceedings
• Proofs of claim

Proofs of Claim and Relief from Stay

If your customer files for bankruptcy protection while owing you money, there are several important things you must know. Upon the filing of a bankruptcy petition, an automatic stay immediately goes into effect and generally prevents creditors and other parties from taking most actions against the bankruptcy estate, the debtor and the debtor’s property. 11 U.S.C. §362. Although you may be owed money, you must cease collection efforts. This “blanket injunction” continues until a Bankruptcy Court order lifting stay has been entered or the stay has been expired. In some cases, the automatic stay is replaced by certain injunctions imposed by an approved Plan (of Reorganization or Liquidation, etc.). This frequently happens when clients wish to attempt to continue existing state court litigation or to pursue a new state court action to collect available insurance proceeds. The Law Office of James Tobia can represent you in seeking relief from the automatic stay and /or plan injunction(s).

In addition, you may file a proof of claim, alleging what the Debtor owes you, so that you may share in the distribution of assets that the Debtor may have available to distribute to creditors. It is important that your filing is complete and accurate and made within the required time period. Often, the Debtor or its representative will object to claims, for such reasons as disputing the amount of the claim, or the classification of such claim, and other reasons. Upon such an objection, the creditor will have the right to prove the validity of the claim. The Law Office of James Tobia, LLC can help you protect your rights and make a bad situation easier by representing you in the fling of the claim and claims litigation.

Bankruptcy Avoidance Litigation: “Clawback Suits”

You may also receive a demand letter and/or be served with a lawsuit seeking recovery of an allegedly preferential payment to your business under 11 U.S.C. §547 and/or seeking recovery of an allegedly fraudulent conveyance under 11 U.S.C. §548. That’s right: You may get sued to recover the payments you previously received for work performed on behalf if the bankrupt business, even though you may still be owed money for services or goods you provided. Although you are owed money, you cannot collect it and must cease collection efforts, and now have to defend a suit for the portion you did receive.

Bankruptcy Motions Practice

In addition to motions seeking relief from the automatic stay or plan injunctions, as discussed above, The Law Office of James Tobia, LLC can assist you or your counsel with the filing of various motions or objections to motions in the bankruptcy case, in order to protect your rights.

If you did business with any Delaware company that has filed for bankruptcy protection or simply gone out of 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 your rights and options at no charge.