Verasun Bankruptcy and Farmers – Demands for Repayment of a Bankruptcy Preference

September 01, 2010

Farm message boards are buzzing about the letters many farmers recently received stemming Verasun’s bankruptcy proceeding. In most cases, these farmers delivered corn to a Verasun plant as part of their normal operations and received a corresponding payment. Since those final payments came in the 90 days before Verasun declared bankruptcy, the letters claim that the farmers must return the payments, settle for a smaller amount, or face a lawsuit. There are reports of farmers who delivered their entire year’s crop to Verasun or who have since retired, now being asked for all of the money back. In many cases, the farm itself could be driven out of business if it complied with the demand.

So if you’re affected, what can you do? The answer is not as cut and dried as the letters make it sound. You do have options besides returning the money or settling and returning a portion of the money. Most likely, the letters were written to scare people into giving up without a fight.

There are several defenses to the claim that you must return the money. The main defense, which will require analysis of the facts of your specific case, is that you received the payment in “the ordinary course of business.” There are other possible defenses, within the context of agricultural law and preference law, that could apply in other circumstances.

If you received a Verasun letter, make sure you don’t ignore it. You truly could face a lawsuit. Instead, you’ll need to respond quickly and intelligently. Because of the technical nature of the preference law area, please do some research or hire a lawyer who can help you.  In Minnesota, farmers can contact this Mower County farm lawyer for further information.

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