Bankruptcy Preference Survey

Live Report

12-Feb-2003 7:10:42 PM

There are a total of 307 responses FROM 24-Jan-2003 to 12-Feb-2003.

1. Bankruptcies have reached significant levels in the last several years. Have you seen an increase in bankruptcy preference actions?

   	Percent	Count	Answers
   	70.5%	213/302	Yes
   	29.5%	89/302	No
   	100.0%	302/302	Summary

   
   
   

2. In your experience, are you less likely to be sued for a preference when the customer files Chapter 11 reorganization as opposed to a Chapter 7 liquidation?

   	Percent	Count	Answers
   	48.7%	145/298	Yes
   	51.3%	153/298	No
   	100.0%	298/298	Summary

   
   
   

3. As an unsecured creditor who has repaid all or a portion of a preference payment based on the action brought against you, have you received a meaningful percentage back based on your unsecured claim?

   	Percent	Count	Answers
   	4.9%	14/285	Yes
   	95.1%	271/285	No
   	100.0%	285/285	Summary

   
   
   

4. Voidable preferences have been in the Bankruptcy law for some time. Do you think that preference defenses, in particular the ordinary course of business defense, is more difficult to prove today then it has historically been?

   	Percent	Count	Answers
   	61.3%	182/297	Yes
   	38.7%	115/297	No
   	100.0%	297/297	Summary

   
   
   

5. Regarding the ordinary course of business defense, have you ever employed an expert to support the standard in the industry?

   	Percent	Count	Answers
   	21.7%	65/300	Yes
   	78.3%	235/300	No
   	100.0%	300/300	Summary

   
   
   

6. Are you a certified expert witness?

   	Percent	Count	Answers
   	10.7%	32/298	Yes
   	89.3%	266/298	No
   	100.0%	298/298	Summary

   
   
   

7. Who, in your opinion, should get the preference money recovered from vendors?

   	Percent	Count	Answers
   	80.7%	242/300	The vendor class
   	4.0%	12/300	The debtor
   	5.0%	15/300	The bond holders
   	27.0%	81/300	The under-secured creditors (secured creditors who have insufficient collateral)

   
   
   

8. Do you believe recoveries from vendors should be shared with bondholder or under secured lenders?

   	Percent	Count	Answers
   	15.4%	45/293	Yes
   	84.6%	248/293	No
   	100.0%	293/293	Summary

   
   
   

9. Do you find that preference recoveries generally benefit vendors' prepetition claims?

   	Percent	Count	Answers
   	18.5%	54/292	Yes
   	81.5%	238/292	No
   	100.0%	292/292	Summary

   
   
   

10. When a customer files bankruptcy in a "debtor friendly" forum such as Delaware or New York, do you find the trustee has greater leverage in forcing settlement, notwithstanding the available preference defenses?

    	Percent	Count	Answers
    	25.2%	75/298	Yes
    	20.1%	60/298	No
    	54.7%	163/298	No experience in a debtor friendly court
    	100.0%	298/298	Summary

    
    
    

11. Do you find you are forced to settle on small dollar preference actions, ($5,000 or less) even though defenses are available?

    	Percent	Count	Answers
    	37.9%	114/301	Yes
    	30.2%	91/301	No
    	31.9%	96/301	No experience on small dollar preference actions
    	100.0%	301/301	Summary

    
    
    

12. It is the responsibility of the trustee to investigate preference defenses.
    Do you believe that generally the trustees do investigate your preference defenses?

    	Percent	Count	Answers
    	35.9%	107/298	Yes
    	64.1%	191/298	No
    	100.0%	298/298	Summary

    
    
    

13. Where the trustee has not investigated the preference defenses and loses, should the trustee pay the preference action costs?

    	Percent	Count	Answers
    	88.4%	260/294	Yes
    	11.6%	34/294	No
    	100.0%	294/294	Summary

    
    
    

14. While the ordinary course defense is the most commonly asserted defense by a vendor, how easy is the defense to apply?

    	Percent	Count	Answers
    	4.7%	14/297	never successful
    	78.5%	233/297	somewhat successful
    	16.8%	50/297	likely to be successful
    	100.0%	297/297	Summary
    	70.7%	2.1/3	Overall rating from 1 to 3

    
    
    

15. Do you feel that the trustee and the courts consistently apply the defense? (In other words, if two creditors from the same industry are using, for example, the ordinary course defense, do you feel the trustee and the court are consistent in their application with each vendor?)

    	Percent	Count	Answers
    	38.0%	103/271	Yes
    	62.0%	168/271	No
    	100.0%	271/271	Summary

    
    
    

16. If you are trying to work with a financially distressed customer prior to bankruptcy, do you think that the ordinary course defense protects you. In other words, do you feel that working with a distressed debtor and having an established payment schedule, may change the ordinary course and protect payments that you receive from the customer?

    	Percent	Count	Answers
    	25.1%	75/299	Yes
    	74.9%	224/299	No
    	100.0%	299/299	Summary

    
    
    

17. Have you ever used a prepetition workout plan as a defense under the ordinary course of business?

    	Percent	Count	Answers
    	18.5%	56/303	Yes
    	81.5%	247/303	No
    	100.0%	303/303	Summary

    
    
    

18. Did that defense work?

    	Percent	Count	Answers
    	17.8%	21/118	Yes
    	82.2%	97/118	No
    	100.0%	118/118	Summary

    
    
    

19. Do you find the bankruptcy preference law to be effective in recovering transfers and redistributing them to creditors?

    	Percent	Count	Answers
    	13.9%	40/288	Yes
    	86.1%	248/288	No
    	100.0%	288/288	Summary

    
    
    

20. Do the preference laws discourage you from taking collection action when the customer is in financial difficulty (thinking that you might have to give it back if you collect it)?

    	Percent	Count	Answers
    	13.7%	41/299	Yes
    	86.3%	258/299	No
    	100.0%	299/299	Summary

    
    
    

21. Have you found the preference actions commenced against you to be arbitrary...sometimes feeling singled out for collection?

    	Percent	Count	Answers
    	47.8%	139/291	Yes
    	52.2%	152/291	No
    	100.0%	291/291	Summary

    
    
    

22. Have you found preferences generally to settle rather than going to trial?

    	Percent	Count	Answers
    	94.1%	273/290	Yes
    	5.9%	17/290	No
    	100.0%	290/290	Summary

    
    
    

23. Approximately how many preference actions have you been a part of as a creditor?

    	Percent	Count	Answers
    	2.3%	7/304	None
    	32.6%	99/304	1 - 5
    	30.6%	93/304	6 - 10
    	12.8%	39/304	11 - 20
    	21.7%	66/304	> Than 20
    	100.0%	304/304	Summary

    
    
    

24. Of the number of actions indicated in the last question, what percent have you settled on as opposed to gong to trial?

    	Percent	Count	Answers
    	6.3%	19/300	none
    	7.7%	23/300	25%
    	3.7%	11/300	50%
    	18.3%	55/300	75%
    	64.0%	192/300	100%
    	100.0%	300/300	Summary

    
    
    

25. In dealing with a financially struggling customer whom you believe will file bankruptcy, do you discuss qualifying as a critical vendor as opposed to accepting prepetition payments that may be recovered as a preference?

    	Percent	Count	Answers
    	29.6%	88/297	Yes
    	70.4%	209/297	No
    	100.0%	297/297	Summary