Selling or giving away something innocently, without trying to hurt your creditors, could still give the trustee the right to get it back.
Selling or giving away something to prevent your creditors from getting it may make a certain amount of sense but could be very dangerous.
“Fraudulent transfers” have similarities to “preferences.” They are both worth understanding because they can cause unnecessary hassles.
You can put a “preferential payment” to work for you if you owe a “priority” debt–back child or spousal support, or recent income taxes.
Make your bankruptcy trustee work for you by retrieving your recent payments to, or garnishments by, creditors–to your benefit.
Prevent your trustee from giving you a big headache if you paid a debt to a friend or relative during the year before filing bankruptcy.
Avoid the frustrating surprise of having one your friendly creditors be challenged by your bankruptcy trustee with a preference action.
Preferences can be dangerous but can also present potential opportunities. So although not all that common, they’re worth knowing about.
Your trustee might be able to require a creditor to pay the trustee money you’d paid the creditor. Sometimes that’s good; sometimes not.
In our example of the adversary proceeding about whether a debt gets discharged, here is the bankruptcy court’s ruling on the matter.
In our example about the adversary proceeding about whether a debt gets discharged, here are the creditor’s and debtor’s closing arguments.
In our example about the process about whether a debt gets discharged, here’s what happens at the bankruptcy court trial itself.