Over the last 12 months there has been a substantial increase in the number of preference recovery actions filed. The irony created by the current economic environment is that many such defendants are themselves financially distressed and unable to fully satisfy any judgment that might be rendered against them.
As a result, while they typically advise the plaintiff on an informal basis as to their financial condition, defendants do not want this information to become publicly known. However, because the bankruptcy process requires transparency, even when the plaintiff agrees to settle for a lesser amount, a defendant may be faced with public disclosure of its precarious financial situation.
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