preference

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Preference

The act of an insolvent debtor who pays one or more creditors the full amount of their claims or a larger amount than they would be entitled to receive on a pro rata distribution.

For example, a debtor owes three creditors $5,000 each. All three are equally entitled to payment, but the debtor has only $12,000 in assets. Instead of paying each creditor $4,000, the debtor pays two creditors in full and pays the third creditor the remaining $2,000.

The Common Law does not condemn a preference. Some state statutes prescribe that certain transfers are void—of no legal force or binding effect—because of their preferential character. If a state antipreference provision protects any actual creditor of the debtor, the trustee in Bankruptcy can take advantage of it.

Bankruptcy law does condemn certain preferences. The bankruptcy trustee can void any transfer of property of the debtor if the trustee can establish the following:

  1. The transfer was "to or for the benefit of a creditor."
  2. The transfer was made for or on account of an "antecedent debt"—that is, a debt owed prior to the time of the transfer.
  3. The debtor was insolvent at the time of the transfer.
  4. The transfer was made within 90 days before the date of the filing of the bankruptcy petition or was made between 90 days and one year before the date of the filing of the petition to an insider who had reasonable cause to believe that the debtor was insolvent at the time of the transfer.
  5. The transfer has the effect of increasing the amount that the transferee would receive in a liquidation proceeding under chapter 7 of the bankruptcy law (11 U.S.C.A. § 701 et seq.). 11 U.S.C.A. § 547.

Other statutory provisions, however, create exceptions; if a transfer comes within an exception, the bankruptcy trustee cannot invalidate the transfer even though the aforementioned five elements exist.

preference

n. in bankruptcy, the payment of a debt to one creditor rather than dividing the assets equally among all those to whom he/she/it owes money, often by making a payment to a favored creditor just before filing a petition to be declared bankrupt. Such a preference is prohibited by law, and the favored creditor must pay the money to the bankruptcy trustee. However, the bankruptcy court may give secured creditors (with a judgment, lien, deed of trust, mortgage or collateralized loan) a legal preference over "general" creditors in distributing available funds or assets. (See: bankruptcy)

preference

noun bias, discretion, election, fancy, favorite, inclination, leaning, liking, partiality, preconceived liking, predilection, prejudice, proclivity, proneness, propensity, selection
Associated concepts: preferred risk

preference

(Priority), noun advancement, advantage, benefit, favored treatment, front position, praepositio, precedence, preeminence, preferment, preferred standing, seniority
Associated concepts: calendar preference, fraudulent conneyances, fraudulent preference, preferred stock, unlawful preference, voidable preference
Foreign phrases: Qui prior est tempore potior est jure.He who is first in time is first in right. Prior tempore potior jure. First in time, superior in right.
See also: advantage, bias, choice, conatus, decision, desire, discrimination, disposition, election, favor, favoritism, inclination, inequity, option, partiality, patronage, penchant, point of view, poll, position, precedence, preconception, predilection, predisposition, prejudice, prerogative, primary, priority, propensity, referendum, selection, volition, vote, will

PREFERENCE. The paying or securing to one or more of his creditors, by an insolvent debtor, the whole or a part of their claim, to the exclusion of the rest. By preference is also meant the right which a creditor has acquired over others to be paid first out of the assets of his debtor, as, when a creditor has obtained a judgment against his debtor which binds the latter's land, he has a preference.
     2. Voluntary preferences are forbidden by the insolvent laws of some of the states, and are void, when made in a general assignment for the benefit of creditors. Vide Insolvent; Priority.

References in periodicals archive ?
Fuzzy preference relations (FPRs) are widely used in decision making, where consistency of FPRs is a major goal and interesting research topic (Herrera-Viedma et al.
With respect to the preference relations of HFSs, Xia and Xu (2013) defined hesitant fuzzy preference relations (HFPRs) and developed an approach to apply HFPRs to decision making.
This section introduces some concepts related to hesitant fuzzy sets (HFSs), fuzzy preference relations (FPRs), and hesitant fuzzy preference relations (HFPRs).
Fuzzy preference relations (FPRs), which integrate fuzzy logic and AHP concepts, greatly improve on AHP in terms of relative weight evaluation.
Many important decision models have been developed using mainly: (1) multiplicative preference relations and (2) fuzzy preference relations (Herrera-Viedma et al.
C (S) = M (S, R)) for each S [member of] B, where R is fuzzy revealed preference relation generated by C.
Following lemma gives the relationship between fuzzy preference relation and fuzzy revealed preference relation.
Using this aggregation operator the collective linguistic preference relation obtained is the following:
Xu [11] has developed a direct approach to decision making with linguistic preference relations.
3) Some work in preference modelling has also addressed non-transitive preference relations, arguing that humans often exhibit non-transitive preferences for the sake of brevity we will omit this issue here.
An approach based on the uncertain LOWG and the induced uncertain LOWG operators to group decision making with uncertain multiplicative linguistic preference relations, Decision Support Systems 41(2): 488-499.
Group decision making based on multiple types of linguistic preference relations, Information Sciences 178(2): 452-467.