Preferential payments
Preferential payments are basically payments made by a bankruptcy debtor to a creditor not listed on the bankruptcy petition. In order to determine whether debtors filing bankruptcy have given “preference” to certain accounts over the others, the Statement of Financial Affairs requires debtors to list total payments of more than $600.00 made to a single creditor within the ninety days prior to filing bankruptcy. Debtors are also required to disclose any payments made to “insiders,” who would be close family members or friends, within the past year. Any of these payments given preference over other bankruptcy debts are subject to being reversed by the bankruptcy trustee in order to pay creditors listed on the petition. Any recovery that is obtained can be shared by creditors filing a proof of claim with the bankruptcy court.
