Posted On: April 20, 2010
Jacksonville Bankruptcy Lawyer Notes Domino Effect of Tousa Chapter 11 Bankruptcy
The Chapter 11 bankruptcy filing of Hollywood, Florida-based homebuilder Tousa Inc. could lead to additional bankruptcy filings among the firm’s many contractors if they are forced to repay what they earned more than two years ago under federal “preference” laws.Under these laws, any firm doing business with a company for 90 days prior to that company’s bankruptcy filing must return the money they were paid by the bankrupt entity. According to a recent article in the Orlando Sentinel on the Tousa Chapter 11 filing, more than 1,000 companies fall into that category – many of them small firms that are already struggling while trying to ride out the slump in the construction market.
Under U.S. federal bankruptcy law, a “preference” is a transfer of assets from a debtor to a creditor that is made while the debtor is insolvent, and gives the creditor more than they would likely obtain through the bankruptcy process. If the transaction takes place within a certain time prior to the bankruptcy filing – usually 90 days – the debtor’s bankruptcy trustee can recover the assets, which then become the property of the bankruptcy estate.
There are some exemptions to bankruptcy preference laws; if you would like more information on preference laws or have questions about Chapter 11 bankruptcy, contact our Jacksonville, Florida bankruptcy law firm.
Greg Gilbert
Keith Maynard
