A notable shift is emerging in the treatment and pursuit of avoidance actions as bankruptcy filings continue to rise across certain sectors of the economy. Preference litigation, long a routine component of Chapter 11 proceedings, is becoming increasingly sophisticated as trustees, litigation trusts, and estate representatives adopt new tools and strategies to maximize recoveries.
While preference claims have historically been viewed as a predictable aspect of bankruptcy administration, recent developments suggest that creditors may face a more challenging landscape in the years ahead. Increased filing activity, enhanced data analytics, and heightened scrutiny of traditional defenses are all reshaping how preference actions are resolved.
For creditors, the ability to respond effectively to a preference demand may increasingly depend on preparation long before litigation begins.
The Growing Role of Preference Actions in Mid-Market Chapter 11 Cases
In recent years, many restructuring professionals have observed a resurgence in avoidance litigation arising from mid-market Chapter 11 cases. Unlike large corporate restructurings, where preference actions are sometimes limited by negotiated settlements or broader restructuring objectives, mid-market cases often place greater emphasis on maximizing estate recoveries through litigation.
This trend is driven in part by economic pressures facing debtors and the growing role of post-confirmation litigation trusts. As stakeholders seek additional sources of recovery, preference actions frequently become a central component of the estate’s strategy.
Recent filing data illustrates the broader restructuring environment. According to the American Bankruptcy Institute and Epiq AACER, commercial Chapter 11 filings increased 42 percent in April 2026 compared to the same period in 2025, while Subchapter V filings for small businesses increased 46 percent year-over-year. These trends suggest that more businesses are entering restructuring proceedings where preference actions may become an important source of estate recovery.
The result is an increasing volume of demand letters and lawsuits targeting payments made during the 90-day preference period. Creditors in industries characterized by high transaction volumes, recurring payments, and extended commercial relationships may be particularly exposed.
While individual claims may vary significantly in size, the cumulative impact of preference litigation can be substantial. Beyond potential liability, creditors must often contend with litigation expenses, operational disruption, and the allocation of internal resources needed to respond to claims.
Taken together, these developments suggest that preference litigation is likely to remain an important feature of the restructuring landscape in the months and years ahead.
Data Analytics Is Reshaping Claim Identification and Prosecution
At the same time, the tools used to pursue preference actions are becoming increasingly sophisticated.
Preference reviews historically relied on manual examination of payment records, invoices, and financial statements. Now, trustees and litigation trusts are increasingly utilizing data analytics platforms capable of reviewing large volumes of transactional information quickly and efficiently, alongside other AI-driven and real-time financial intelligence tools.
These technologies allow estate representatives to identify payment patterns, compare historical transaction behavior, and detect potential deviations from established practices. In many cases, analytics are being used not only to identify potential claims but also to evaluate the strength of anticipated defenses before litigation begins.
The growing use of data-driven analysis may alter the dynamics of preference litigation in several respects. Trustees can pursue claims with greater precision, while creditors may encounter more detailed challenges to their defense positions. Assumptions that previously went untested may now be supported (or disputed) through extensive transactional analysis.
As a result, creditors should anticipate that future preference disputes may increasingly be driven by data rather than general characterizations of the parties’ business relationship.
Ordinary Course and New Value Defenses Under Greater Examination
Despite these developments, the ordinary course of business defense and the subsequent new value defense remain among the most effective tools available to creditors facing preference claims.
However, these defenses are also receiving increased scrutiny.
The ordinary course defense often turns on whether challenged payments were consistent with the historical dealings between the parties or conformed to prevailing industry practices. As trustees gain access to more sophisticated analytical tools, they are becoming better equipped to identify deviations in payment timing, collection efforts, credit terms, and other transactional metrics.
Similarly, the subsequent new value defense depends heavily on documentation demonstrating that the creditor provided additional goods or services following receipt of an allegedly preferential payment. Incomplete records, disputed invoices, or gaps in supporting documentation can complicate the assertion of these defenses.
For creditors, the lesson is not necessarily that these defenses are becoming less effective. Rather, it is that successfully asserting them may require greater preparation, stronger evidentiary support, and a more detailed understanding of the underlying transactional history.
Documentation that may once have been considered routine is increasingly becoming central to litigation strategy.
Why Early Strategic Positioning Matters More Than Ever
As preference litigation becomes more sophisticated, timing is emerging as an increasingly important factor in determining outcomes.
Many creditors do not begin evaluating their defense posture until after receiving a demand letter or complaint. By that stage, valuable time may already have been lost in gathering records, reconstructing payment histories, and assessing available defenses.
Early strategic positioning can significantly affect both litigation leverage and settlement opportunities. Creditors that promptly evaluate their exposure are often better equipped to identify strengths in their defense, challenge unsupported assumptions, and engage in negotiations from a position of knowledge rather than uncertainty.
In addition, early analysis may reveal opportunities to preserve evidence, address documentation gaps, and develop persuasive factual narratives before positions become entrenched through litigation.
The practical effect is that preparation frequently influences outcomes long before a court becomes involved.
THCA’s Approach to Preference Defense Strategy
We advise creditors, trade vendors, and other stakeholders facing preference demands and avoidance litigation in bankruptcy proceedings.
As trustees and litigation trusts continue to refine their approach to preference recovery actions, effective defense strategies increasingly require a combination of legal analysis, financial review, and detailed examination of transactional records. Our team works with clients to evaluate potential exposure, identify available defenses, and develop strategies designed to protect creditor rights while maximizing negotiating leverage.
Through extensive experience in bankruptcy litigation and creditor representation, THCA assists clients in responding to demand letters, analyzing ordinary course and new value defenses, and navigating the procedural complexities that often accompany avoidance actions.
Preparing for a More Sophisticated Litigation Environment
The evolving use of analytics, combined with increasing pressure on trustees and litigation trusts to generate recoveries, reflects a broader shift in how preference actions are pursued.
For creditors, this underscores the importance of early engagement, comprehensive documentation, and a clear understanding of available defenses. Organizations that maintain strong records and proactively assess their litigation posture may be better positioned to manage risk and respond effectively when claims arise.
As this landscape continues to evolve, the question is no longer whether preference actions will remain a significant feature of Chapter 11 proceedings, but how creditors can position themselves most effectively when those claims emerge.
THCA remains committed to helping our clients develop defense strategies that protect creditor rights, preserve leverage, and support favorable outcomes in an increasingly data-driven restructuring environment.