FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

Among the issues to consider in any settlement discussion are the cost oflitigation to the parties, as well as the costs and delays attendant in theenforcement of a judgment and the possibility of an appeal. Included in thesecosts are the right of the plaintiff to recover interest from at least the date of thedemand for the return of the preference, and in some courts, from the date of thetransfer itself.In negotiating a settlement, the defendant should calculate the amount ofany unpaid debt (which might also be used for the new value defense) and theamount of the preference to be repaid, and then calculate how much of a dividendis expected to be repaid to creditors. Not only will the possibility of a dividendlimit damages (one of the elements of the preference is that it permitted thecreditor to receive more than would have been paid in a liquidation), but it may bepossible to settle a case by waiving a claim, rather than by repaying thepreferential transfer.Once a preferential payment is recovered, the creditor who returned thepayment is entitled to file a proof of claim for the amount of the returned payment,under Section 502(h). Settlement proposals should be reviewed carefully to insurethat this right is not being waived as part of the settlement.