Many times when facing insolvency issues a debtor, either a business or individual, will look to pay one creditor over another, this is called a preference. If the payment was not in the ordinary course of business and the transaction occurred within the 90 days prior to the date of filing the bankruptcy case, then the preference is likely avoidable.
For businesses this may be paying a large sum to creditor, such as a supplier whom you want to repay in full before filing. For individuals this may be a large payment to a family member.
If this has occurred the case trustee or another party in interest may be able to force the creditor to return the payment to your bankruptcy estate. Then the case trustee will distribute the non-exempt funds to your creditors’ pro-rata.
If you have made a large payment to a creditor prior to filing bankruptcy you should discuss this situation with your attorney.
