BANKRUPTCY LAW Preferential Transfer: Can the Transfer Be Unwound?
BANKRUPTCY LAW (Preferential Transfer): A preferential transfer is a payment made within 90 days before the filing of bankruptcy, which is not made in the ordinary course of business. WHEN the trustee or Court finds that the debtor has made such a transfer, the transfer may be unwound, and the money ordered returned to the bankruptcy estate. The creditor who received the money will have to dig into its pockets and return the funds to the court.
In determining whether a payment is a preference, the court can conduct a hypothetical payment analysis to determine whether that payment would have been made had bankruptcy had not been filed. If the creditor received more via the questioned transaction than it would have received in the bankruptcy, then the payment is a preference (“preferential transfer”). In re Tenderloin Health 849 F 3rd 1231, 9th Circuit 2017