Preference Period

Last Updated: Jun 7, 2019

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In bankruptcy or Chapter 11, there is a 90 day period prior to the bankruptcy filing known as the "preference period". With few exceptions, a security interest obtained or perfected within this period is void and any payments received by a creditor during the preference period must be returned to the debtor. In some cases, the preference period may be extended to the full year prior to the bankruptcy. There are additional key rules and creditor preferences to consider with respect to vendor payments and recently received merchandise from vendors in the 45 days just prior to the bankruptcy filing.