Preference Payments

Preferences are payments or transfers that may be recovered by a Bankruptcy Trustee, in other words you must first become bankrupt before your Trustee could seek to recover any preference payment from any of your creditors. Only payments can be recovered where it can be established that the creditor received a preference or advantage over other creditors. In other words the Bankruptcy Trustee must be able to establish that the creditor received more (prior to bankruptcy) than what they would have received from the distribution in the bankruptcy. The Trustee in Bankruptcy must be able to prove that the person making the payment (ie the person that later became bankrupt) was insolvent when they made the payment. Preference Payments can only be recovered with a Court order (unless an out of Court settlement is agreed between the creditors and the Bankruptcy Trustee).