Everything You Need To Know About Bankruptcy Preferences

Many people considering filing for bankruptcy in Schaumburg, Chicago, Joliet and Warrenville area consult Chang and Carlin LLP Law Firm to determine whether to file for bankruptcy or not. Our experienced Schaumburg Bankruptcy attorneys and attorneys in other areas of Chicago tell those people that they have the right under federal law to file for bankruptcy relief from their creditors.

The U.S. Bankruptcy Code, Section 547, permits a debtor in bankruptcy or its trustee to “avoid” (i.e., force disgorgement or repayment) transfers made within 90 days of a bankruptcy filing (one year if the transferee was an insider). The Bankruptcy Code gives the debtor and/or the bankruptcy trustee several devices to avoid payments.  Probably the most frequently used of these devices is the `bankruptcy preference’. It refers to treating certain creditors better than others shortly prior to the filing of your bankruptcy. 

 A bankruptcy preference is a transfer made shortly before the case is filed that the trustee can take back from one creditor and share with all the other creditors. The transfer must be:

      1. Of money or property in which the debtor has an interest.

      2.  Made to creditor owed money by the debtor.

      3.  More than the creditor would receive in a Chapter 7 distribution.

      4.  Made within a certain period of time. 

If the court agrees with the trustee and a payment or transfer is in fact a preference, the receiving creditor has to give back the money or property and it will be used to pay all of your creditors.

However, there are several exceptions or defences a creditor may use to stop the trustee from cancelling a payment or transfer as a preference. It's up to the creditor to prove to the bankruptcy court that one of the exceptions applies. 

Preferential payments and transfers can get complicated. Talk to your Chicago bankruptcy attorney before you make any payments to creditors to make sure you get the full benefit of the payment. You don't want a payment to backfire when the person or company you pay has to turn it over to the trustee.

Contact a Chicago Bankruptcy Lawyer at Chang and Carlin, LLP to learn more about bankruptcy preferences.  Chang and Carlin L.L.P, provides excellent legal services to assist clients with bankruptcy and non-bankruptcy alternatives to meet their financial needs.

Contact Chang and Carlin for a Free Bankruptcy Consultation Today!

If you are filing for bankruptcy in Illinois, get in touch with Chang and Carlin, LLP today for a Free Bankruptcy Consultation. We understand what you’re going through and can help you navigate the bankruptcy process with precision.

Disclaimer: The content provided by Chang and Carlin, LLP is not legal advice and is purely for informational purposes. The information contained herein is not a substitute for the advice of an attorney and does not create an attorney-client relationship. If you are interested in obtaining information about Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Foreclosure services, or Real Estate legal services, call our law firm at 1-866-790-8601 for a Free Legal Evaluation. Chang and Carlin, LLP serves clients in Chicago, Schaumburg. Joliet, and Warrenville.