Bell Nunnally Partner T.J. Hales authored the Dallas Bar Association (DBA) Headnotes article “Was the Debtor Truly Insolvent at Payment?”  In the article, he examines how defendants can challenge preference claims under 11 U.S.C. § 547 by focusing on whether the debtor was actually insolvent at the time of the transfer. Hales explains that while insolvency is presumed during the 90-day prepetition period, that presumption can be rebutted with financial records, expert analysis and other evidence.

“Since the plaintiff bears the ultimate burden of establishing insolvency at the time of the alleged transfer, a defendant should scrutinize the debtor’s finances leading up to the petition date,” Hales writes. He also highlights the importance of timing, noting that non-insider creditors face no preference liability outside the 90-day window.

Hales further emphasizes that challenging expert assumptions, particularly reliance on book value instead of fair valuation, can create leverage in disputes over solvency. He concludes that evaluating solvency early in response to a demand “may be worth the effort.”

To read the full article, please click here (page 6).