Discuss the differences between preferences and fraudulent transfers

Question

What will be an ideal response?

Answer 1

A voidable preference occurs when a debtor, within 90 days of filing for bankruptcy, makes a payment or transfers property to one of his or her creditors in repayment of a debt. The first step in determining whether a preference exists is whether the property the debtor transferred would have been part of the bankruptcy estate if the debtor had not transferred it. The trustee may ask is, "would that property have been available to the trustee to liquidate and proportionally distribute to the creditors if the transfer never occurred?" A fraudulent transfer involves the transfer of personal or real property with the intent to defraud creditors. The transferee's role is irrelevant. Findings of actual fraud have been made when the trustee offered evidence showing that a debtor transferred assets shortly before filing for bankruptcy. Some examples include the transfer of title to real estate or personal property, such as a vehicle, just prior to filing the bankruptcy petition, with zero or little consideration received by the debtor or evidence that the debtor transferred assets in a bank account into another individual's name a week or so prior to filing the bankruptcy petition.