Commercial Chapter 11 filings held near decade-high levels for the second consecutive year in 2025, with 7,940 filings recorded according to Epiq AACER data.
The opening quarter of 2026 intensified the pressure further, with commercial Chapter 11 filings running 37% higher year over year compared to the same period in 2025.
What has received far less attention than the headline filing numbers is the mechanical legal consequence that follows elevated bankruptcy activity: the preference wave.
Avoidance actions lag bankruptcy filings by twelve to twenty-four months, meaning trustees and creditors’ committees typically file preference claims near the two-year deadline imposed by Section 546(a) of the Bankruptcy Code.
These actions are often filed in a single mass sweep, targeting every vendor that received a payment in the ninety days before a debtor’s petition date.
Two consecutive years of elevated filings have already made the coming volume of demand letters a near certainty, regardless of what the remainder of 2026 brings.
Under Section 547(b) of the Bankruptcy Code, a trustee can claw back payments a debtor made in those ninety days before filing, on the theory that those payments preferred one creditor over others at the expense of the broader creditor body.
A trustee does not need to prove the vendor acted wrongly — a supplier can ship goods, invoice, receive payment, and find itself facing a claw-back demand eighteen months later in a distant bankruptcy court.
Two features of the current insolvency cycle are making this wave larger than previous cycles, according to analysis by Shane G. Ramsey of Nelson Mullins.
First, the sheer volume of estates now being administered means preference programmes are running across a greater number of cases simultaneously, with preference claims treated as recoverable assets like any other estate property.
Second, the economics of modern preference litigation have shifted materially, as liquidating trusts increasingly retain contingency-fee counsel, meaning even mid-five-figure claims of around $75,000 are now being actively pursued where they previously might have been set aside.
The two most powerful defences available to vendors under the Code are the ordinary course of business defence under Section 547(c)(2) and the subsequent new value defence under Section 547(c)(4), and both turn almost entirely on documentary records.
A properly constructed new value ledger, mapping post-payment shipments against each challenged payment, “routinely reduces exposure by 40-70 percent, and sometimes to zero,” according to Ramsey’s analysis.
Since 2019 amendments to Section 547(b), trustees are required to conduct reasonable due diligence and account for a party’s known or reasonably knowable affirmative defences before filing suit, giving vendors who submit a credible defence package early a meaningful statutory lever.
Vendors are advised to preserve all payment history, invoices, shipping records, and credit department correspondence going back at least two years, suspending routine document destruction immediately for any accounts under watch.
Statutory thresholds also provide additional protection, as preferences below $8,575 in aggregate for non-consumer cases filed on or after 1 April 2025 cannot be avoided at all under Section 547(c)(9).
Smaller claims up to $31,425 for cases filed on or after 1 April 2025 must generally be brought where the defendant resides rather than in the debtor’s home bankruptcy court under Section 1409(b), limiting the venue disadvantage vendors often face.
The practical reality is that the overwhelming majority of preference claims settle before trial, meaning the central question becomes not whether a vendor can win in court, but whether it holds the data to negotiate effectively.
“A vendor who responds to a demand with a clean ordinary course analysis and a documented new value ledger settles for a fraction of face value, often for nuisance value, and sometimes for a walkaway,” Ramsey writes.
The demand letter is not the beginning of the case but the middle, and for many vendors the relevant ninety-day window has already closed, leaving only the work of assembling the record it created.