Preferences or “preferential transfers” are payments the person who filed bankruptcy made to one or more creditors before filing their case. Because it’s unfair to prefer one creditor over all others, a trustee can “avoid” a preferential transfer to get the funds back from the recipient. Once the funds have been recovered, they’re distributed to all creditors in fair shares.
All payments made to creditors in the 90 days before a case is filed have to be disclosed and payments totalling more than $600 to a single creditor during this time frame can be avoided by the trustee.
If the filer owes or owed money to a family member, friend, or other person or business that they have a close personal relationship with, all payments made in the 12 months before a case is filed have to be disclosed and can be recovered by the trustee.