An Example of a “Preference”
A "preference" makes more sense when you see an example. Here's one. This also helps explain how to avoid creating one.
If you pay on or pay off certain debts it may create a preferential payment
Do you feel like you should pay on or pay off a certain debt now, even though you're behind on all your debts? It may be dangerous to do so.
Using “Preference” Law to Pay a Necessary Debt
You can put a "preferential payment" to work for you if you owe a "priority" debt--back child or spousal support, or recent income taxes.
Using “Preference” Law to Your Advantage
Make your bankruptcy trustee work for you by retrieving your recent payments to, or garnishments by, creditors--to your benefit.
Avoiding the “Preference” Problem
Prevent your trustee from giving you a big headache if you paid a debt to a friend or relative during the year before filing bankruptcy.
The “Preference” Problem
Avoid the frustrating surprise of having one your friendly creditors be challenged by your bankruptcy trustee with a preference action.
The Practicalities of “Preferences”
Preferences can be dangerous but can also present potential opportunities. So although not all that common, they're worth knowing about.
Your trustee might be able to require a creditor to pay the trustee money you'd paid the creditor. Sometimes that's good; sometimes not.
Bankruptcy Timing and the Holidays: “Preferenceâ Payments
You may have extra motivation and greater ability to repay a personally important debt this time of year. But maybe you shouldn't.
Giving More Thanks for Chapter 7 “Straight Bankruptcy”
Here are more features of Chapter 7 worth knowing and taking advantage of.
Mistakes to Avoid: Paying a Favored Creditor Before Filing Bankruptcy
Doing what you believe is the right thing can backfire, if you pay a special creditor before you file bankruptcy.
Big Mistakes to Avoid When Considering Bankruptcy
Decisions that seem to make sense at the time can end up being against your best interest. Hereâs what to look out for.
Making Sense of Bankruptcy: Avoid Dangerous “Preference” Payments
Be careful about trying to be nice and paying back relatives and friends in order to keep them out of your bankruptcy case.
Crucial Question: Is It OK to Pay a Special Creditor Before Filing Bankruptcy to Keep It Out of the Bankruptcy Case?
Not a good idea. If you do your friendly creditor may have to turn over to the trustee whatever you paid it. So it wonât be so friendly.
The Extraordinary Tools of Bankruptcy: Recovering Money After It’s Garnished
If you lost money through garnishment during the 90 days BEFORE filing bankruptcy, that money may be returned to you or a favored creditor.