Preferences or Transfers on Account of an Antecedent Debt

Preferences or transfers on account of an antecedent debt occur when a debtor pays off a creditor before declaring bankruptcy, thereby favoring that creditor over others. This action can be scrutinized under bankruptcy law, as it may be seen as an unfair advantage given to one creditor at the expense of others. The law ensures that in a bankruptcy situation, all creditors are treated equitably. If a payment is deemed preferential, the bankruptcy trustee can potentially seek to recover the funds to redistribute them fairly among all creditors.