Though, they are illegal when done with the intent to defraud creditors, hide money, or conceal assets.

Preferential payments or transfers are not illegal on their face. The above criteria apply to insiders, but the look-back period is a year instead of only 90-days.Ĭonsequences of Preferential Treatment of Creditors Payments made to so-called insiders, which includes your friends, family, business partners, basically anyone with whom you have a personal connection, are more heavily scrutinized in bankruptcy. The payment(s) gave the creditor more than it would have otherwise received in your bankruptcy.Made while you were insolvent (your debts were higher than your assets) and.Total over $600, aggregate, to a creditor in the 90-days prior to filing bankruptcy.Payments that meet the following three criteria are preferential payments: The look-back period on preferential treatment of most creditors is 90-days prior to filing for bankruptcy. When Debt Payments Are Considered Preferential in Bankruptcy It may cause more problems than it’s worth. Do not pay back your friends or family before filing for bankruptcy.

Often we see this when a person wants to pay back friends or family for money they borrowed before filing for bankruptcy. Some people filing for bankruptcy have certain debts they would prefer to pay back, or would prefer to pay back before others. Preferential treatment is payment on a debt or transfer of property made for the benefit of certain creditors over others shortly before filing for bankruptcy. You want to avoid giving one creditor preferential treatment over another one. It can cause serious problems in your case, and can even cause your bankruptcy case to be open for longer and cost significantly more in attorneys fees. Preferential treatment of creditors before filing for bankruptcy is a bad idea.

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