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A Transfer Enabling a Creditor to Receive More Than It Would in Chapter 7

Learn about the requirement that, to be avoidable as a preference, a transfer must enable a creditor to receive more than it would in chapter 7.


As we've discussed in other lessons, the Bankruptcy Code generally empowers the trustee or debtor-in-possession to set aside and recover, for the estate, certain prebankruptcy transfers to creditors. These transfers are called preferences. There are several requirements that any transfer must satisfy to be avoidable as a preference. Here, we'll focus on one, which we'll call the relative-benefit test.

I. Introducing the Relative-Benefit Test

Under this test, the court must find that the...