Preferences / Preferential Transfers

Definition

Preferences or “preferential transfers” are payments the debtor made to one or more creditors in the 90 days before filing their case.


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Because it’s unfair to prefer one creditor over all others, the 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. Payments totaling more than more than $600 to a single creditor made in the 90 days before filing 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 on that debt made in the 12 months before a case is filed have to be disclosed and can be recovered by the trustee.

NOTE: Having made a preferential payment to a creditor does not "invalidate" or otherwise jeopardize the success of your bankruptcy case. It impacts your creditors more than you.

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