A preferential transfer is a payment a debtor makes to one or more creditors before filing for bankruptcy that results in paying back an unequal amount of debt to their other creditors. It gives preferential treatment to some creditors over others, and a bankruptcy trustee may decide to claw back the payment.
What is preferential transfer?
Preferential transfers include certain payments or transfers of property to creditors made prior to filing for bankruptcy . For example, paying back a loan from your parents just before you file for bankruptcy will typically be considered a preferential debt payment.
What does antecedent debt mean?
antecedent debt. An antecedent debt is created when a creditor receives a right to . payment from the debtor for goods or services .12 Section 547(b)(2) of the. Bankruptcy Code requires that the party who is alleged to have received a preference. must have been owed a “debt” by the debtor, and the debtor must have owed ...
What is a preferential payment?
What is Preferential Payment? Preferential payment is a payment or asset transfer to the creditor before liquidation process . Such creditors have advantage over other small creditors. A liquidator can recover funds directly from the creditors.
What is a preference period?
The “preference period” is 90 days prior to the bankruptcy filing for typical creditors and 1 year for “insiders .” Insiders are defined as relatives of the debtor, a general partner of the debtor, or, if the debtor is a corporation, officers, directors, or a person in control of the company.
What is a voidable transfer?
Basically, a “fraudulent” or “voidable” transfer is when a person shifts an asset to a relative or business partner to avoid collection by a creditor .
What are the types of preferential creditors?
In bankruptcy cases in most legal systems, the types of creditors with preferential status are defined by law and commonly include preferred bondholders and sometimes tax authorities . A preferred creditor can also be an economic development institution.
What is antecedent debt in family law?
“Antecedent debt” means a debt which is prior in time as well as in fact . 5. The fact that the father is alive or dead does not affect the liability.
What is pious obligation?
‘Pious obligation' means the moral liability of sons to pay off or discharge their father's non-avyavaharik debts . ... The ancient doctrine of pious obligation was governed by Smriti law. There is a pious obligation on the sons and grandsons to pay the debts contracted by the father and grandfather.
What is Avyavaharika debt?
Generally speaking, a debt is said to be “ avyavaharika ” when it is “repugnant to good morals”. ... The word avyavaharika does not cover merely those debts which are illegal or immoral, but also all debts which the Court regards as inequitable or unjust to make the son liable.
Which one of the following is not preferential creditors?
which of the following are not preferential creditors 1. all sum due to employees from provident fund , gratuity fund ,pension fud or any other fund maintained for employees welfare. 2.
What is the maximum preferential salary and wages?
4 months salary & wages due to the employees of the company will be treated as preferential provided that it must become due within 12 months before the date of winding up. Maximum of Rs. 20000 will be treated as preferential creditors.
What is the difference between a secured and unsecured creditor?
Secured creditors often require collateral in the event the borrower defaults. Usually, bankruptcy is the only option for unsecured creditors if the borrower defaults. Unsecured creditors can range from credit card companies to doctor's offices.
What is an unfair preference payment?
An unfair preference is a transaction (commonly a payment of funds or a transfer of assets) entered into by an insolvent company which provides an unsecured creditor of the company who received the benefit of the transaction with a priority or advantage over other creditors.
How do you avoid preference payments?
Put the Debtor on Cash-in-Advance Terms . This is the best and easiest way to avoid a preferential transfer. By its own terms, a cash-in-advance payment is not a preferential transfer because the debtor is not making payment for an antecedent debt.
What is a voidable preference?
An unfair preference (or “voidable preference”) is a legal term arising in bankruptcy law where a person or company transfers assets or pays a debt to a creditor shortly before going into bankruptcy , that payment or transfer can be set aside on the application of the liquidator or trustee in bankruptcy as an unfair ...
