In short
A bankruptcy trustee can recover a preferential transfer: a payment to a creditor for an existing debt, made while the debtor was insolvent and within 90 days before the petition (1 year for insiders), that gives the creditor more than it would get in a liquidation.
Key takeaways
- The debtor is presumed insolvent during the 90 days before filing.
- Payments in the ordinary course of business and exchanges for new value at the same time aren't recoverable.
- Insiders include relatives, officers, directors and partners of the debtor.
Where it's tested
REG: Debtor-Creditor & Bankruptcy — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A payment made by an insolvent debtor to an ordinary trade creditor 60 days before filing bankruptcy, on an old debt, may be: