What are “preference payments” in a Chapter 11 bankruptcy?

Preference payments are payments made to a creditor prior to the filing of the Chapter 11 bankruptcy in California. These payments are treated differently from other payments in the bankruptcy process. A debtor’s preference payments are payments that are made on a pre-existing debt that is secured by a lien or a security interest. Preference payments can be made in the form of cash, goods or services. The purpose of preference payments is to ensure that the debtor is not avoiding or paying special attention to certain creditors over others during the bankruptcy process. Usually, if a creditor is receiving preference payments, this has the potential of affecting the bankruptcy case. In certain cases, a trustee can go back in time to a debtor’s payments and make a claim for the recovery of those payments. This is done to protect the creditors that were not given preference payments and to make sure that they are treated fairly and equally. If it is found that a debtor has made a preference payment to a creditor, the trustee has the right to recover the preference payment from that creditor. In conclusion, preference payments are payments made to a creditor prior to the filing of a Chapter 11 bankruptcy in California. These payments are made on pre-existing debts and are usually made in the form of cash, goods, or services. Preference payments are closely monitored to ensure equity among all creditors and in some cases, the trustee has the right to recover these payments to protect the other creditors.

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What are “preference payments” in a Chapter 11 bankruptcy?

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