Question

John's brother, Phil, loaned him $10,000 to start his business. John didn't do too well and planned to file for bankruptcy. In May, he gave Phil his car worth $8,000 to satisfy the debt. John filed his petition in November. After liquidation, if the car were included in his assets, every unsecured debtor would have received 85% of the debt owing to him. Will this be a voidable preference?

Answer 1

No, this is not a voidable preference. John didn't treat Phil's loan differently and didn't give him Phil preferential treatment over other creditors.

A voidable preference happens when a debtor decides to pay, either in cash or by transferring assets, a debt just before filing for bankruptcy.

In this case John transferred his car to Phil in May and he filed for bankruptcy in November.