In our last post we outlined the “ordinary course payment” legal defense against a bankruptcy preference claim. Now let’s look at the “subsequent new value” defense in a bit more detail.

Subsequent new value is in the nature of a set off, and is meant to encourage creditors to continue to deal with a company that may be close to filing bankruptcy. The defense says that if, after you receive a payment that otherwise qualifies as a preference, you give new “value” to the debtor, you essentially get to deduct the new value from the preference payment.