What Is Preference And Fraudulent Transfer?

Last updated on February 23, 2021

When a business or individual files for bankruptcy, all collection efforts by creditors must come to a stop. The bankruptcy court will decide how to divide up the available assets among the debtor’s creditors. When a single creditor makes a side deal with a debtor to have their debt paid shortly before the bankruptcy filing, other creditors may accuse the debtor of making a fraudulent or preferential transfer, which the trustee can reclaim.

No matter which side of an action you find yourself, I can help. I am Kell C. Mercer, and I have over 20 years of experience assisting businesses throughout Texas, both as debtors and creditors. I focus my practice on helping small and midsized businesses that are looking for the flexible, personalized attention a small firm can offer, but also want an attorney with a big-minded approach to bankruptcy representation.

Has A Fraudulent Transfer Occurred?

The crux of these cases is determining whether a fraudulent conveyance has occurred. This question alone can require a lengthy court battle. The court will look at the following actions:

  • Did the debtor repay any creditors within the six months prior to filing bankruptcy?
  • Did the debtor repay officers or directors within the past year?
  • If so, were any of those payments for “new value received?”
  • Was the transfer made in order to avoid the repercussions of bankruptcy on that asset?

After analyzing the situation, if the court determines the debtor violated corporate bankruptcy law, other creditors may request recovery of those payments.

I Understand Your Rights

Whether you are a creditor or a debtor, I can assist you with either bringing or defending a fraudulent or preferential transfer case. The laws regarding this issue are very complex. You need a business litigation attorney on your side. I understand the stakes at issue and what is needed to protect your legal rights.

Schedule an appointment with me by calling my Austin office at 512-855-6056 or filling out my online form.