What is the meaning of “preference”?

In the context of Virginia’s Creditors Rights Law, “preference” refers to a creditor’s attempt to be paid back in full before other creditors in the case of a debtor’s insolvency or bankruptcy. Preference can be seen as an act of unfairness between a debtor and creditors causing injury to one or more of the creditors. In the situation of an insolvency or bankruptcy, the debtor’s assets are collected and distributed among the creditors. When a creditor is given preferential payment over other creditors, it means that a certain creditor receives the entirety or a larger portion of the assets over another creditor. This is not the norm. The assets collected belong to all creditors and should be distributed in equal portions. Virginia’s Creditors Rights Law has several provisions that prevents creditors from receiving unfair preferences. Specifically, according to the law, if a creditor is given preference over another creditor within ninety days of the filing of an insolvency or bankruptcy proceeding, the preference must be returned to the debtor, provided that certain criteria are met. So, in short, preference in the context of Virginia’s Creditors Rights Law means the favor given to one or more creditors while the payment distribution process is ongoing. This favor could be in the form of a larger portion or all of the assets collected during the insolvency or bankruptcy process.

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What is the meaning of “preference”?

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