Short Bark Industries – Preference Defense Lawyer

On September 24, 2019, Don A. Beskrone, Chapter 7 Trustee (“Trustee”) for Debtors Short Bark Industries, Inc. and EXO SBI, LLC (the “Debtors”), began filing complaints seeking to avoid and recover alleged preferential and/or fraudulent transfers pursuant to Sections 547, 548, and/or 550 of the United States Bankruptcy Code.

Procedural History:

On July 10, 2017 (the “Petition Date”), each of the Debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. On July 13, 2017, the Court entered an Order directing the joint administration of the Debtors’ cases under case No. 17-11502-KG.

On September 5, 2018, the Debtors filed a motion for an order converting the Debtors’ Chapter 11 Cases to Cases Under Chapter 7 Bankruptcy Code and the Court entered an Order converting these Cases on September 26, 2018.

These adversary actions are before the Honorable Kevin Gross.

Background, as alleged by Plaintiff:

Prior to the Petition Date, Debtor Short Bark Industries (the “Debtor”), was in the business of providing body armor, apparel, and accessories for military, government, and police force use. The Debtor’s primary customer was the United States government. The Debtor’s products included combat shirts, combat jackets, combat uniforms and garments, as well as associated items such as modular lightweight load-carry equipment rucksacks and assault packs. Additionally, the Debtor manufactured uniforms for Superior Uniform Group, which supplied uniforms to Walmart.

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 pages on Preference Defense Litigation: http://www.tobialaw.com/practice-areas/delaware-preference-defense-lawyer/ and Fraudulent Transfer Defense Litigation: https://www.tobialaw.com/practice-areas/delaware-preference-defense-lawyer/defense-of-fraudulent-transfer-actions/

If you were an investor in or conducted business with Debtors Short Bark Industries, Inc. or EXO SBI, LLC and especially if you have received a demand letter or a complaint or if a complaint has been filed against you or your business even if not served yet, 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.