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Are All Creditors Equal In New York?

Prior to filing bankruptcy, you may provide payment to some creditors and nothing to others. These types of payments are deemed “preferences,” because you favor some creditors over others. If a payment qualifies as a preference, then the trustee may require the creditor to give back the funds to your bankruptcy estate, to be divided in equal shares among creditors. A skilled consumer bankruptcy attorney can provide clients information regarding preferences, insiders and other creditors.  

Defining preferences

If a consumer pays more than $600 to a creditor within the year on file for bankruptcy to business partners or relatives, or within three months to other creditors, then the payment may be deemed a preference by a trustee under 11 U.S.C. §547. All creditors are required to be treated equally, regardless of whether family or emergencies are involved. However, if a payment is made more than 90 days prior to filing for bankruptcy, and you were not insolvent at the time, then the payment will not be deemed a preference. The presumption is that you are insolvent during the 90 days preceding filing for bankruptcy — therefore, if a payment is made within the 90 days, then the payment will be reversed. The court examines payments made to outside creditors, such as businesses, within a three-month period prior to filing for bankruptcy. 

If a payment is made in the ordinary course of business or the debtor’s financial matters, then it is not classified as a preference. Routine and usual payments for personal expenses and long-term debt, which are not deemed as preferences, include:

  • Mortgage
  • Utilities
  • Services

To resolve whether a payment is deemed a preference, consult a proficient New York consumer bankruptcy attorney for guidance.

Seek assistance from an efficient New York bankruptcy attorney

By retaining Mark E. Cohen, Esq., you can work with an attorney who is committed to effectively pursuing a client’s objectives. The office represents clients in Queens and the surrounding boroughs who possess bankruptcy questions.

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