The Bankruptcy Code uses such confusing terminology. What is meant by such terms as “preference” and “fraudulent conveyance”?
Preferences and fraudulent conveyances are two ways in which a debtor facing the prospect of bankruptcy may attempt to show favoritism to a particular creditor or close family member or associate, or even set aside some property for himself or herself to avoid losing it to the bankruptcy estate.A preference occurs when a debtor treats one creditor more favorably than the others. If a debtor has only $500, for instance, and owes that same amount to both First County Bank and First State Bank, but the debtor pays all $500 to First County Bank, that bank has received a preference. Bankruptcy law disfavors preferences if they are made for the benefit of a particular creditor and for a debt owed prior to filing bankruptcy, if the debtor is insolvent at the time of the payment, and if payment is made within ninety days before filing (or one year, if made to an insider like a family member or an officer of a corporate debtor). Creditors receiving preferences may be required to return the amou
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- The Bankruptcy Code uses such confusing terminology. What is meant by such terms as preference and fraudulent?