Voidable preference financial definition of voidable preference
The transfer of assets
to a secured creditor
less than 90 days before a bankruptcy
filing. The voidable preference means one secured creditor is favored over others. After bankruptcy is filed, the trustee in bankruptcy
may prevent this creditor from receiving the assets and instead transfer them to another creditor.
In bankruptcy law, the notion that a transfer of property within a certain time period before filing for bankruptcy may be set aside,because it takes property out of the bankruptcy estate and may diminish the money available for unsecured creditors.There does not have to be any showing of fraudulent or dishonest intent.
References in periodicals archive
Since 2001, the court-appointed statutory creditors' committee has been actively pursuing claims against Motorola for voidable preference
, fraudulent conveyance, breach of contract and breach of fiduciary duty, and sought more than $4 billion in total damages.
There may be a question as to whether such an option should be deemed a voidable preference.
States that have enacted versions of the Uniform Act typically have enacted a voidable preference provision that permits a receiver to avoid any pledge of assets made within a certain period (in some cases up to one year) prior to commencement of the receivership if the pledge was made with the intent of giving a preference and the creditor had reasonable cause to believe that the preference would occur.
In addition, the Court rejected the Commissioner's request for findings that the Company's use of the NOLs and worthless stock deduction were voidable preferences
and/or fraudulent transfers.
These measures dealt with voidable preferences
in bankruptcy law.