Creditor’s petition-six months before it was filed.The transfer of the asset must occur during a specific period before bankruptcy, which depends on how the bankruptcy was commenced: The amount of the preference claim is the value of the asset transferred. a security-is sufficient to be a transfer of property. Commonly a transfer is a payment of money, but any asset passing from the bankrupt to the creditor-even an asset that is created by the transaction, e.g. There must have been a transfer of some property between the parties. The transaction must involve or have been done at the direction of a bankrupt’s creditor, and must have satisfied a debt that would have been provable in the estate if the transaction had not been undertaken. Must there be a debtor–creditor relationship? The onus of proving insolvency is on the trustee. The reasoning is that a solvent person has the capacity to pay all their debts (regardless of whether they actually did), and therefore no creditor could have been advantaged over other creditors by receiving the transferor payment. To have a preference voided, the bankrupt must have been insolvent at the time of the transfer or payment. The Bankruptcy Act defines being insolvent as “not being able to pay all your debts as and when they become due and payable”. the creditor suspected-or should have suspected-that the bankrupt was insolvent at the time.the transaction gave the creditor an advantage over other creditors-usually determined by the creditor receiving more than if they had proved for that amount in the bankrupt estate.it occurred within the relevant period before the bankruptcy.it occurred at a specific time when the bankrupt was insolvent.something passed from the bankrupt to a creditor, or on the creditor’s instructions.a transfer of property was made (usually a payment of money).What are the elements of a preferential payment?īefore a court will void a payment or transfer, it must be satisfied that: Trustees can void transactions that involve one creditor to make a more equitable distribution to all creditors. To do so a trustee must identify whether any creditor received a distribution-prior to the bankruptcy-that was not equitable when compared to the distribution to other creditors in the bankruptcy. The trustee’s main role is to distribute a bankrupt’s assets fairly between their creditors. Why do trustees void preferential payments? In personal insolvency administrations, only trustees of bankrupt estates and personal insolvency agreements-where the agreement allows-can claim the return of preferential payments. Preferences are usually payments of money, although a variety of transfers of assets can be deemed as preferential. Bankruptcy trustees can recover these payments or transfers under the provisions of the Bankruptcy Act 1966. Preferential payments or ‘preferences’ are payments or asset transfers to creditors that give them an advantage over the other creditors.
This factsheet outlines the basics of how preferences in bankruptcy works. Preferences in bankruptcy: What is a preferential payment in bankruptcy? Preferential payments or ‘preferences’ are payments or asset transfers to creditors that give them an advantage over the other creditors.
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