Section 547 (U.S. Bankruptcy Code)

Section 547 of the U.S. Bankruptcy Code addresses "preferences," which occur when a debtor pays off certain debts shortly before filing for bankruptcy. This law allows the bankruptcy trustee to potentially recover these payments if they favor one creditor over others, aiming to ensure fair treatment among all creditors. Specifically, it targets payments made within 90 days prior to the filing (or one year for insiders). The goal is to prevent debtors from favoring specific creditors while neglecting others, maintaining equity in the distribution of the debtor’s remaining assets during bankruptcy proceedings.