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Preference Financial Glossary

What is it? A legal term used in bankruptcy to describe a transaction deemed to have occurred under circumstances favorable to the creditor that benefited from the transaction. This provision is intended to protect unsecured creditors. Under the U.S. Bankruptcy Code, the preference period for most creditors is 90 days prior the date of the debtors petition filing. The exception is a one year preference period applicable to creditors deemed to be an insider with respect to the bankrupt debtor. Collateral interests obtained by a creditor during the preference period are undone by the bankruptcy.

Finance Term Definition Added By: Savannah

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