Preferential transfer

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A preferential transfer is a transfer of money (or property) by someone in the period just prior to going into bankruptcy. By law those transfers can then be undone or rescinded, and the money retrieved from the recipient, after the debtor goes into bankruptcy.

Federal law[1] defines as preferential transfer as "any transfer of an interest of the debtor in property --

"(1) to or for the benefit of a creditor;

"(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

"(3) made while the debtor was insolvent;

"(4) made --

(A) on or within 90 days before the date of the filing of the petition; or

(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and

"(5) that enables such creditor to receive more than such creditor would receive if --

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the extent pro- vided by the provisions of this title."


  1. 11 U.S.C. § 547(b).

See also