It is not uncommon for a supplier of goods or services to receive a demand letter or adversary complaint alleging that it received avoidable transfers—commonly known as "preferential payments" or "preferences"—during the 90 days preceding a customer's bankruptcy filing. Such claims arise under section 547 of the Bankruptcy Code, and can result in a supplier having to return certain payments made during the 90-day preference period.

Many creditors have had the unfortunate experience of receiving a demand letter or adversary complaint alleging that they received avoidable transfers—commonly known as "preferential payments" or "preferences"—during the 90 days preceding a customer's federal bankruptcy filing. Such claims arise under section 547 of the Bankruptcy Code, and can result in a creditor having to return certain payments made during the 90-day preference period.

The United States Bankruptcy Code provides that any interest that a debtor holds in property as of the date of the debtor's bankruptcy filing becomes property of the debtor's bankruptcy estate. 11 U.S.C. § 541(c)(1). In a chapter 7 bankruptcy case, a trustee will be appointed to, among other things, liquidate property of the debtor's bankruptcy estate for the ultimate payment of the debtor's creditors. 11 U.S.C. § 704(a)(1).