Which of the following could be preferential payments under the Bankruptcy code?

Question

Which of the following could be preferential payments under the Bankruptcy code? You must also explain why?

(each is worth 5 points for a total of 35 points)

a. You pay back a $2,000 loan from a parent or sibling within one year of the date you filed bankruptcy

b. You pay off a large credit card balance 90 days before filing for bankruptcy

c. A friend or family member pays one of your creditors in exchange for work you do for the friend or family member

d. You give a creditor a lien or mortgage on some land you own to secure payment of an old debt you owe 90 days before your bankruptcy case is filed

e. PMSI in equipment for $100,000 with the debtor getting possession on April 1, 2015, and the filing to perfect that interest is filed on April 15, 2015. However, the debtor filed for bankruptcy on April 3, 2015.

f. A PMSI in equipment that was filed on April 1, 2015, when the debtor had possession of the equipment on September 1, 2014 and the debtor filed for bankruptcy on May 1, 2015.

g. A bank loan for $40,000 entered into on June 1, 2014 and payable in full at 4% interest on May 31, 2015. However there were payments made of $1000 on August 1, 2014, December 1, 2014, March 1, 2015, and April 1, 2015 with the debtor filing for bankruptcy on April 15, 2015.

Explanation / Answer

Answer: a. You pay back a $2,000 loan from a parent or sibling within one year of the date you filed bankruptcy

b. You pay off a large credit card balance 90 days before filing for bankruptcy

c. A friend or family member pays one of your creditors in exchange for work you do for the friend or family member

d. You give a creditor a lien or mortgage on some land you own to secure payment of an old debt you owe 90 days before your bankruptcy case is filed

Because

The bankruptcy law details what and when the trustee may cancel as a preference, but in general, a preferential payment or transfer is one made:

For example, there's probably a preferential payment or transfer if:

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