The month a bankruptcy clawback came for money I had already earned, at $58K MRR

That sentence arrived on a Tuesday, as a PDF, from a law firm I had never heard of, about a customer I had stopped thinking about in March. We were at $58,000 MRR. The money they wanted back had been earned, invoiced, collected, banked, taxed and spent on payroll the previous winter. Nothing in the letter suggested I had done anything wrong, and that was the part that took me longest to understand.

Quick answer (2026): This diary is a composite. I write these as one continuous founder's account, but the numbers, the customer and the letter are assembled from several real situations rather than transcribed from one. The substance is accurate. When a business customer goes bankrupt, the trustee, or in a Chapter 11 the debtor in possession, can sue to recover ordinary payments you received in the 90 days before the petition. That is 11 U.S.C. 547, and it is real. What almost no guide mentions is that the same section contains a floor, and that the floor's actual number is not printed in the statute. The codified text says $5,000. The operative figure since 1 April 2025 is $8,575. My demand was for $8,550. I was twenty-five dollars under a line I did not know existed.

The letter

Harbor Line Freight was a mid-market logistics operator. They had been on our largest plan for two years at $2,850 a month, they paid by ACH on the fifteenth, and they never once opened a support ticket. They filed Chapter 11 on 11 March 2026. I heard about it from a trade newsletter, wrote off the one unpaid invoice, closed their workspace and moved on.

The demand landed in August. It listed three transfers, 15 December, 15 January and 15 February, totalling $8,550, and asked for all of it back within twenty days. It was signed by counsel for the debtor in possession, which confused me until I read 11 U.S.C. 1107(a): a debtor in possession holds, with narrow exceptions, "all the rights ... and powers, and shall perform all the functions and duties ... of a trustee serving in a case under this chapter." So the company that owed me money was now, in law, the party suing me to get more of it back.

The number everyone quotes

Every page I read that week said the same thing. Holland and Knight put it as plainly as anyone: "The general rule is that a trustee may seek the return of funds paid by the debtor to third parties in the 90 days prior to the bankruptcy filing." That is correct, and on its own it is terrifying, because it describes a rule with no floor. Read only that, and the logic is that any customer who fails can reach backwards and take a quarter of their revenue off you, with no wrongdoing required on either side.

I spent two days believing exactly that. Then I read the statute rather than articles about it.

Reading the statute gives you the wrong number

Section 547(b) lets the trustee avoid a transfer. Section 547(c) then lists nine exceptions, and the ninth is the one nobody quotes. In the codified text on Cornell it reads: the trustee may not avoid a transfer "if, in a case filed by a debtor whose debts are not primarily consumer debts, the aggregate value of all property that constitutes or is affected by such transfer is less than $5,000."

$5,000. I did the arithmetic, found $8,550 comfortably above it, and felt worse than before.

Then I noticed the footnote hanging off that figure. It says, in full, "See Adjustment of Dollar Amounts notes below."

That footnote is the whole post. 11 U.S.C. 104 puts the 547(c)(9) figure on an automatic three-year escalator: on 1 April 1998 "and at each 3-year interval ending on April 1 thereafter" the amount is adjusted for the Consumer Price Index and rounded "to the nearest $25". The escalator has been running for nearly thirty years. The number in the statute has never been updated to match, because it does not have to be; the real figure lives in a notice the Judicial Conference publishes in the Federal Register.

The current one is document 2025-02207, published 4 February 2025. Its chart has one line that mattered to me:

Section 547(c)(9), old amount $7,575, new amount $8,575, effective 1 April 2025.

So a founder who reads 11 U.S.C. 547(c)(9), takes the printed number and stops is working from a figure that is $3,575 too low. I was that founder for about forty minutes.

Twenty-five dollars

$8,575 minus $8,550 is $25.

That is one rounding increment. Section 104 rounds the adjusted amount to the nearest $25, so the margin between "they cannot bring this claim at all" and "we are litigating" was, for me, the smallest unit the statute is capable of producing. If Harbor Line had paid on the fifteenth four times in the lookback window instead of three, or if our plan had been ten dollars more expensive, the answer flips completely.

I want to be careful about what I am claiming, because I got this wrong first and the wrong version was much more comforting.

The reading I wanted to be true

My first instinct was that 547(c)(9) tests each payment. Three separate transfers of $2,850, each one nowhere near $8,575, each one exempt, margin of $5,725, letter dismissed, back to work.

That is not what it says. The test is "the aggregate value of all property that constitutes or is affected by such transfer". The word is aggregate. It is the total that gets measured against the threshold, which is precisely why a floor of a few thousand dollars is meaningful at all rather than trivially satisfied by anyone billing monthly. My margin was never $5,725. It was $25, and reading it the flattering way would have given me a false sense of a defence I did not have.

The date that was not mine

Here is the part I still find genuinely unfair, and it is why I am writing this down.

Section 104(c) says adjustments "shall not apply with respect to cases commenced before the date of such adjustments." The Federal Register notice says the same thing in its own words: "This adjustment does not apply with respect to cases commenced before April 1, 2025."

Harbor Line filed on 11 March 2026. After the cutoff, so my threshold was $8,575 and I was under it.

Had they filed thirteen months earlier, in February 2025, the governing figure would still have been $7,575. The same three payments, the same customer, the same contract, the same me, and $8,550 would have been $975 over the line instead of $25 under it.

Nothing about my business decides which of those two worlds I am in. The trigger is the date a customer I do not control chose to file a petition I was not told about. That is worth sitting with before you assume a threshold like this is protection you can plan around. It is not a policy. It is a coin landing.

Three defences I did not have to use

Because the floor applied, I never had to argue the merits. I read them anyway, and I would want them if the coin had landed the other way.

Section 547(c)(2) protects a transfer made in payment of a debt incurred in the ordinary course of business, where the transfer was either "made in the ordinary course of business or financial affairs of the debtor and the transferee" or "made according to ordinary business terms". That "or" is doing a lot of work. You need one of the two, not both. Two years of the same ACH on the same day of the month for the same amount is close to the paradigm case.

Section 547(c)(4) covers subsequent new value: the trustee cannot claw back a payment to the extent that, after it, you gave the debtor new value. I kept serving Harbor Line every month I was paid. Each month of service after a payment is value delivered.

And section 547(b) itself, since a 2019 amendment, permits the trustee to act only "based on reasonable due diligence in the circumstances of the case and taking into account a party's known or reasonably knowable affirmative defenses under subsection (c)". A mass-mailed demand to every vendor on a payables ledger is in tension with that sentence.

One asymmetry to know before leaning on any of them. Section 547(g) splits the burden of proof down the middle: "the trustee has the burden of proving the avoidability of a transfer under subsection (b) of this section, and the creditor or party in interest against whom recovery or avoidance is sought has the burden of proving the nonavoidability of a transfer under subsection (c) of this section." The clawback is theirs to prove. Every exception that would save you is yours to prove, out of your own records, years after the fact and about a customer you have already offboarded. That is the entire practical argument for keeping invoice and delivery history on dead accounts, which is precisely the history I would have cleared out in a tidier year.

Where they would have had to sue me

The last thing I found is the most practical, and I have never seen it mentioned in a clawback explainer.

28 U.S.C. 1409(b) says a trustee may bring a proceeding to recover "a debt (excluding a consumer debt) against a noninsider of less than" a set figure "only in the district court for the district in which the defendant resides." The same February 2025 notice raised that figure from $25,700 to $31,425.

My $8,550 is not close to $31,425. So the picture I had been carrying, of being dragged into a bankruptcy court two thousand miles away to argue about three ACH payments, was backwards. For a claim this size they come to me.

There is also an outer clock. Under 11 U.S.C. 546(a) an action under 547 may not be commenced after the earlier of two years from the order for relief, or the case being closed or dismissed. It is a long horizon, not an unlimited one.

What actually happened

We replied with a short letter citing 547(c)(9), the February 2025 notice and the petition date. Nothing came back. That silence is not a ruling and I am not presenting it as one; it is what happens when a claim is barred on its face and everyone involved can read a chart.

The one thing I would tell you

Do not read a dollar amount out of the United States Code and act on it. Check whether that amount is on the section 104 escalator, and if it is, find the current Federal Register notice, because the printed figure can be years stale and mine was wrong by $3,575 in the direction that would have cost me money.

And the smaller thing, which I have actually changed. Our finance sheet now records, for every customer above about $2,000 a month, the trailing 90-day total we have collected from them. It takes one formula. It tells me, at any moment, the exact size of the claim a customer's bankruptcy could bring against us, and whether that number is on the safe side of a threshold I do not control and cannot negotiate. On the day the letter arrived I did not know that figure, and finding it out took me two days I did not have.