Avoidable Preference and Pre-Bankruptcy Payments

One of a bankruptcy trustee’s many duties is to make sure that creditors in a bankruptcy case are fairly treated. As a result, trustees have the responsibility to investigate significant payments between debtors and creditors to prevent any favoritism in debt repayment, or avoidable preference. As such, trustees have the power to redirect certain payments made before the creditor filed for bankruptcy and to reassign that money to the larger bankruptcy estate.

If you’re thinking about filing for bankruptcy, we may be able to help you through this process and better prepare you for what is to come. For more information about the rules involved before, during, and after bankruptcy proceedings, contact Florida bankruptcy lawyer Ryan J. Really, Attorney at Law, PLLC, today at (239) 237-0675.

Pre-Bankruptcy Payment Limitations

Bankruptcy trustees have the right to reverse payments made before the creditors filed for bankruptcy if they believe these payments are unfair to other creditors involved in the bankruptcy process. As a result, the following limits are usually placed on pre-bankruptcy payments:

  • Business debtors may only make payments up to $5,850 before a trustee becomes involved
  • Debts paid to friends, family members, and business associates within the past year must be below $600, otherwise a trustee may investigate the payments
  • A bankruptcy trustee can only redirect payments made to regular creditors if those payments reached $600 in the 90 days prior to bankruptcy

Normally, avoidable preferences are made as a thoughtless mistake or before the thought of filing bankruptcy enters a debtor’s mind. However, if an avoidable preference is made as a means to defraud creditors, bankruptcy trustees may be able to take severe action against a debtor.

Contact Us

Working through bankruptcy can be a difficult but important process for a debtor in need of financial freedom. Fortunately, we may be able to help make this process easier to handle. To learn more about how we can assist you, contact Florida bankruptcy attorney Ryan J. Really, Attorney at Law, PLLC, by calling (239) 237-0675 today.