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Fending Off the Trustee

By Robert Lochhead
November 27, 2007

It could be called a nightmare scenario within a nightmare scenario. A client or customer of your company has filed for bankruptcy protection. That's bad enough: a major source of future revenue may have just gone up in smoke. You also have to calculate what's owed to you, and worry that you'll get any of it back. However, looking at the report from accounts receivable, the customer settled its debts with you 30 days ago. They're paid up. You relax, thinking you've dodged a bullet. Until you receive notice of a preference action from the company's bankruptcy trustee, demanding that you give back the money you were paid. Now you need to know your legal options and how to respond, as the decisions you make in handling this could impact whether or not you can hang on to those funds.

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