P

Preference

The term preference refers to a payment or other similar transaction within a period of six month to two years before a liquidation or bankruptcy. The importance of a preference consists in its ability to place a creditor or other people related to the defaulter in a better position compared to where they would be in different circumstances.

From the legal perspective, preference is defined as follows:

• payment of a previous (former) debt



• the transaction is made while the debtor was unable to pay debts, so was insolvent



• the payment made to a non-insider creditor within 180 days of the filing for bankruptcy

As a matter of fact, the individuals appointed by law to liquidate assets, the administrators as well as the trustees in bankruptcy might recover the amounts that are proved to be preferences.