Preferences and Fraudulent Transfers

Preferences and Fraudulent Transfers

The bankruptcy process can be long and complicated for both creditors and debtors. With more than 100 years of collective experience, the Houston bankruptcy attorneys at Adair Myers Stevenson Yagi can guide you through the maze of bankruptcy proceedings, and can tailor a strategy to specifically meet your long-term goals and financial interests.


Bankruptcy law is designed not just to protect debtors, but also to protect creditors. Sometimes a business might seek to pay off one creditor before filing for bankruptcy, and this is called a preference. Under some circumstances, preferences are not allowed under bankruptcy law because they may provide unfair treatment to creditors.

Debtors intending to file for bankruptcy have a window of 90 days in which payments to specific creditors can be considered as a preference. If a payment to a creditor is more than what would be encountered in the “ordinary course of business,” the creditor could be forced to give the payment back so it can be equally divided among all creditors in bankruptcy proceedings. If creditors are considered “insiders” like family members or friends, the window in which payment made before a bankruptcy will be considered a preference increases to one year.

Fraudulent Transfers

Fraudulent transfers or conveyances are concerned with the debtor and his or her intent when transferring money or property. A fraudulent transfer occurs when a debtor transfers ownership of property or capital to a trustee with the intent of protecting this asset from creditors and bankruptcy proceedings.

If a debtor sells valuable assets to a trusted individual, sometimes a spouse, friend, or business partner, for substantially less than what the asset is worth, this is considered constructive fraud, and a bankruptcy court can force the assets to be returned so they can be evenly divided amongst creditors.

Houston Preferences and Fraudulent Transfers Lawyers

The attorneys at Adair Myers Stevenson Yagi represent both creditors and debtors in bankruptcy proceedings, which gives us invaluable insight into the most effective strategies for each side. If you have been accused of making either preference payments or fraudulent transfers, or if you are a creditor and suspect your debtor might have done so, call our experienced Houston bankruptcy attorneys today. We can analyze the situation and help you take action to protect your financial interests.