If your company has just received a bankruptcy preference demand, the first reaction is often some mix of confusion, frustration, and urgency. A customer already filed bankruptcy, you already provided goods or services, and now someone is asking for money back. That can feel upside down.
In general terms, that reaction is common. Preference demands arrive because the Bankruptcy Code allows certain pre-bankruptcy payments to be challenged and, in some cases, recovered for the benefit of the estate. Under 11 U.S.C. § 547, a trustee or debtor-in-possession may try to avoid transfers made shortly before the bankruptcy filing if the statutory elements are met. As bankruptcy filings and adversary proceedings have risen in recent years, more vendors, lenders, and service providers are finding themselves on the receiving end of these letters. The federal judiciary reported 557,376 bankruptcy petitions in 2025, up 10.6% from 2024, and 17,493 adversary proceedings in 2025, up 6% from the prior year. That broader volume trend helps explain why preference exposure is back on more creditors’ radar. See the latest data from the U.S. Courts on bankruptcy filings and Judicial Business 2025.
If you want a broader foundation before digging into the questions below, it may help to start with this overview of how preference clawback claims work and where the risk usually comes from.
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A lot of creditors begin here, and for good reason.
A preference demand is not automatically valid just because it arrives on law firm letterhead or references Section 547. The sender still has to be the right party, and the demand still has to line up with the statute. In many bankruptcy cases, the claim is pursued by a trustee, liquidating trustee, plan administrator, or debtor-in-possession acting on behalf of the estate. The statute itself says the trustee may avoid certain transfers, subject to the defenses in subsection (c) and other limits in the Bankruptcy Code. You can review the operative language in 11 U.S.C. § 547(b) and (c).
That means a demand letter is often the beginning of the analysis, not the end of it. Creditors commonly ask whether the sender identifies the bankruptcy case, the transfers at issue, the dates, the payment amounts, and the legal basis with enough clarity to evaluate the claim. In some situations, the letter includes only a lump-sum demand and a short deadline. That can leave out details that matter a lot, including whether known affirmative defenses were taken into account. Notably, Section 547 now expressly references reasonable due diligence and a creditor’s known or reasonably knowable affirmative defenses in evaluating avoidance claims under subsection (b). That statutory language has become part of the modern preference conversation, especially at the pre-suit demand stage. See 11 U.S.C. § 547(b).