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What is a "preference" in a bankruptcy case?

In most bankruptcy situations, unsecured creditors get treated equally. In other words, all unsecured creditors share an equal burden or benefit. If there are assets to divide, they are shared in equal proportion. If there is debt to be discharged, all unsecured creditors must bear a loss. "Preference" law is triggered when a debtor "prefers" one or more creditors over others by attempting to ease the favorites' pain. An example is a debtor who purposefully declines to list a known creditor in his bankruptcy filing in order to avoid cutting off payments to that known creditor. Nobody likes the credit card company that has been calling for money endlessly for months, but lots of people love their local doctor, so many times people do not want to see that local doctor "thrown under the bus" and they try to keep "mum" about the doc. Another example is making payments to known creditors at the expense of others, especially in the period right before filing a bankruptcy. For example during the month before you file your case you stop paying everyone except your doctor, and you pay him off in full with a lump sum. There is a "look back" period for this type of activity: If a debtor makes unusual payments to favored creditors just before filing a bankruptcy, the Court can reverse the payment and cause the creditor to return the money. If it is an arms length creditor, the look back period is 90 days prior to filing. If it is an insider creditor (like your brother or sister or business partner) the look back period is one year prior to filing. The bottom line: if you are considering a bankruptcy anytime in the next year, DO NOT make anything more that your normal payments to any creditor, because when the Court gets involved and asserts its power to reverse a preference, things can get very ugly. You have to consider expensive legal action to preserve the payment if possible. The creditor has often spent the money that the court now demands back, and there are hard feelings, to say the least! From the creditor's standpoint, its' bad enough lose your investment. It's even worse to get paid back and then get a call from the Court demanding the money, especially after you've made your mortgage payment with it!!! Do not let this happen!! Talk to your lawyer!! Get advised before you act. Call me at 518-533-5982 and get your questions answered.

Attorney Paul B. Sherr serves clients in the following areas:

New York: Albany, Troy, Rensselaer, Saratoga Springs, Clifton Park, Schenectady, Hudson, Glen Falls, Washington County, Schoharie County, and Greene County.


Massachusetts: Berkshire County, including Pittsfield, Dalton, Washington, Otis, Becket, Hinsdale, Richmond, Lenox, Lee, Stockbridge, West Stockbridge, Great Barrington, Alford, Sheffield, Tyringham, Monterey, Egremont, Cheshire, Adams, North Adams, Hancock, Williamstown, and Lanesboro.

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We hired Attorney Sherr for litigation with great results. His work is outstanding and to this day, he is my business attorney.
With my sincere thanks,
- - Mary A Busch

Dear Paul, I just want to take a few moments to express my gratitude for all the support and expertise you provided me in a situation I was certain had no solution. You were wonderful Paul. Thank you for my peace of mind.
- - Rose M.


I recently enlisted his help in a home owners insurance claim issue. He was very quick to get to the heart of the matter and had it settled in a very timely manner.
- - George and Carol Karlewicz


I needed advice about a financial problem, and I needed advice about bankruptcy. Attorney Sherr is accountable, thorough, and down to earth. I recommend him without hesitation.
- - N. Lowe

Paul Sherr made a difficult situation easy and understandable. I highly recommend his services. He took care of my case is a quick and efficient manner, while being generous with his time and fair with his fees.
- - Kathryn Levin
149 Main Street
Ravena, New York 12143
Phone: 518-533-5982
Fax: 312-253-1173

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