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Vendors Become Easy Target In Bankruptcy Cases

Law360 (September 14, 2007, 12:00 AM EDT) -- Small vendors already have a hard enough time staying afloat after a major customer goes bankrupt, but they could be driven out of business if they become the target of preference claims in a bankruptcy case.

Preference claims, under the U.S. Bankruptcy Code, are intended to keep an insolvent company from preferring one creditor over another. And the bankrupt company is allowed to sue vendors to compel them to return payments they received within 90 days of the bankruptcy filing.

The main objective of these claims...
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