The bankruptcy trustee doesn’t have an unlimited timeframe to work from.
Second, the money must be meant to repay part of a debt that existed before the date of the payment. This money could be paid voluntarily, or it could be taken through a wage garnishment or a bank levy. There are two elements that must be present before the bankruptcy trustee can recover a payment under the preferences rule.įirst, the creditor – the person who made the loan – received money from the borrower. The bankruptcy trustee can take these payments and divide them fairly among other creditors. Preferential payments are part of the bankruptcy estate. What are the elements of a preferential payment generally This article will explore what constitutes a preferential payment and why it matters to you if you’re thinking about filing a Chapter 7 bankruptcy. Such preferential payments can be recovered by the bankruptcy trustee so the funds can be distributed to all unsecured creditors in shares.
Preferential payments, or preferences, are payments made to creditors before a bankruptcy case is filed that allow the creditor to receive more than they would have been able to recover in the bankruptcy case.
#Examples of preferential treatment how to
How to protect a family member or friend from a preference avoidance action.What are the elements of a preferential payment generally.
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