Can a debtor give special treatment to certain creditors?
• Can a business be forced into bankruptcy ? Q: What is “bankruptcy” and how does it affect business? A: While technical definitions of bankruptcy can vary, the term refers to a situation where an individual or a business has liabilities that exceed assets, or where the person or business is insolvent by reason of not being able to meet financial obligations as they become due. Virtually anyone or any type of business entity can start a bankruptcy proceeding by filing a petition in federal bankruptcy court. The bankrupt person who files a petition is called the bankruptcy debtor. The filing of a bankruptcy petition affects all creditors of the debtor. There are many different categories of creditors, including: • Secured creditors (usually those with a lien on a debtor’s property) • Unsecured creditors (usually vendors, credit card companies and anyone else who doesn’t have a security interest in any of the debtor’s property • Judgment creditors (usually those creditors who have sued a
• As a general rule, no. In any bankruptcy, the fair treatment of all creditors is a main goal. Practically any transfer of business property or assets during the 90 days before bankruptcy is filed may be avoided or set aside by the bankruptcy trustee. That includes making payments to creditors. Also, transfers to insiders (relatives, general partners and directors or officers of the business, for instance) made up to one year before filing can be avoided. And, the laws in your state may give the trustee even motre time to avoid some transfers. It’s important to talk to your attorney about all transfers, payments, etc. made by the business to make sure it’s the right time to file for bankruptcy.
