What is a Preferential Transfer in a Bankruptcy Case?
Whether you are an individual or a business planning to file for bankruptcy in South Florida, it is important to understand the potential issue of the “preferential transfer” if you have any plans to make payments to creditors prior to your imminent bankruptcy filing. In short, if you make payments to some creditors before you file for bankruptcy (but close in time to your bankruptcy filing), these payments may not ultimately be payments that the creditor can keep. Yet even more important for the debtor making these payments is that, if the payments meet the factors of a “preferential transfer,” then these payments must be disclosed in the bankruptcy case in order for the debtor to avoid penalties and the possibility of bankruptcy fraud allegations.
Our West Palm Beach bankruptcy attorneys can provide you with more information about preferential transfers below, and we can speak with you today about your financial circumstances and bankruptcy plans to ensure that preferential transfers either do not occur or will be properly disclosed as part of your bankruptcy case to avoid any issues.
What Makes a Payment a Preferential Transfer?
A preferential transfer is a payment made to a creditor shortly before a bankruptcy filing that is considered to be unfair because it puts that creditor’s interests above another creditor’s interests, such that the latter creditor may not ultimately be able to get paid fairly from the bankruptcy estate.
What makes a payment a preferential transfer? In general, all of the following must be true in order for a payment to be considered a preferential payment:
- Payment or transfer was made for a creditor’s benefit;
- Payment or transfer was made to the creditor for a debt owed;
- Payment or transfer was made while the debtor was struggling to repay debts;
- Payment or transfer was made within the 90-day period prior to the debtor’s bankruptcy filing; and
- Creditor received more than what they would have received in a liquidation bankruptcy.
What Should I Do If I Have Already Made a Payment that May be a Preferential Transfer?
If you have already made a payment that may be a preferential payment, you may learn that the payment will be reversed in your bankruptcy case unless the creditor can raise a relevant defense. What is most important for you as the debtor, however, is to know that you must disclose preferential payments. By working with a bankruptcy attorney from the start of your case, you can be sure that any preferential transfers are handled properly.
Contact Our West Palm Beach Bankruptcy Lawyers Today
Bankruptcy law is extremely complicated, and many different kinds of issues can arise in a given bankruptcy proceeding. If you have any questions or concerns about preferential transfers or any other matters that could impact your bankruptcy proceeding, you should get in touch with one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan Delaney & Eller, PLLC as soon as possible. We can answer any questions you have, and we can begin working with you on your bankruptcy case. Contact our firm to learn more about the bankruptcy services we provide to individuals and businesses alike in South Florida.
Source:
law.cornell.edu/uscode/text/11
