"Preference payments" made by the debtor to one creditor to the detriment of all other creditors within 90 days before the bankruptcy petition was filed:
A) is reduced from the monies available to the general unsecured creditors.
B) is usually written off.
C) may be recovered and returned to the cash available for all creditors.
D) are not recovered, as management assurances are binding.

Question

Quizplus · Accepted Answer

Preference payments made by the debtor to one creditor to the detriment of all other creditors within 90 days before the bankruptcy petition was filed may be recovered and returned to the cash available for all creditors. This is because such payments are considered preferential treatment and go against the principle of equal distribution among all creditors. The bankruptcy trustee has the power to recover these payments and use them to pay off all creditors proportionally.

"Preference Payments" Made by the Debtor to One Creditor to the Detriment