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

In a Chapter 11 bankruptcy in Utah, “preference payments” refer to payments made by a debtor to a creditor before a business has filed for bankruptcy. Preference payments are usually made within 90 days of when the bankruptcy filing is made. These payments are made to creditors who have been given preferential treatment due to the payment, such as payments that are made to repay a debt that had been partially paid before the filing or payments made to certain creditors in order to avoid bankruptcy. The preference payment law is meant to ensure a fair and equal distribution of assets amongst creditors. The law states that creditors must be treated on equal terms with respect to the amount of money they receive when a business files for bankruptcy. As a result, if a debtor has made payments to certain creditors that make them a “preferred” creditor, those payments are subject to being recouped and redistributed to other creditors who have yet to receive a payment. This payment is referred to as a “preference payment” and could have a significant impact on how much a creditor would receive at the end of the bankruptcy proceedings. The Chapter 11 bankruptcy process in Utah is complex and it is important to understand the various laws that govern the process. Preference payments are one of the many aspects of the law that is important to understand in order to ensure everyone is treated fairly and creditors receive the money they are owed.

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

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