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 ?
In general, the consistency of a preference relation is identified by transitivity properties among preference judgments.
For a hesitant fuzzy preference relation (HFPR), it is not easy to deal with its consistency due to different numbers of possible values in hesitant fuzzy elements (HFEs).
Significant attention has been given to fuzzy preference relations in previously studies (Orlovsky 1978; Nurmi 1981; Tanino 1984; Kacprzyk 1986; Chiclana et al.
M- rational), if there exists a preference relation Q on X such that C (S) = G (S, Q) (resp.
One of the special features of CP-nets is that there is always a default model--namely, the model that satisfies all and only the preference relations derived from the input statements.
In this section, the two examples show the two problems in technology project assessment respectively, including linguistic and subjective information and pair comparison of preference relation.
2]-complete, depending on the restrictions placed on the preference relations.
The simple preference relation has as its domain the three stamps a, b, and c.
2] than A because of the monotonicity of the preference relation.
One of the by-products of the scrutiny of those assumptions was a reconsideration of the problem of representation of a preference relation by a differentiable utility function.
Xu and Chen [17, 18] studied the decisionmaking methods of the interval fuzzy preference relation, the interval utility value, and the interval multiplicative preference relation.
One is to deny that the preference relation [greater than or equal to] can be structured so as to obtain an equally optimal action problem.