Unfair Preference
An unfair preference (or "voidable preference") is a legal term arising in bankruptcy law where a person or company transfers assets or pays a debt to a creditor shortly before going into bankruptcy, that payment or transfer can be set aside on the application of the liquidator or trustee in bankruptcy as an unfair preference or simply a preference. Overview The law on unfair preferences varies from country to country, but characteristically, to set a transaction or payment aside as an unfair preference, the liquidator will need to show that: #the person or company was insolvent at the time the payment was made (either on the ''cash-flow'' test, or on the ''balance sheet'' test - it varies from country to country) #the person or company then went into bankruptcy within a specified time thereafter, usually referred to as the ''vulnerability period'' #the payment had the effect of putting the creditor in a better position than other unsecured creditors #in some jurisdictions, it is ...
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Bankruptcy Law
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. Bankrupt is not the only legal status that an insolvent person may have, and the term ''bankruptcy'' is therefore not a synonym for insolvency. Etymology The word ''bankruptcy'' is derived from Italian ''banca rotta'', literally meaning "broken bank". The term is often described as having originated in renaissance Italy, where there allegedly existed the tradition of smashing a banker's bench if he defaulted on payment so that the public could see that the banker, the owner of the bench, was no longer in a condition to continue his business, although some dismiss this as a false etymology. History In Ancient Greece, bankruptcy did not exist. If a man owed and he could not pay, he and his wife, children or servants were forced int ...
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