What is a preference payment in bankruptcy?

A preference payment is a payment of more than $600 made by the debtor to one creditor on a debt that the debtor owed before they filed for bankruptcy.  The payment must have been within the 90 days before the debtor filed, been made when the debtor was already insolvent, and the creditor must have received more than they would have normally in a Chapter 7.Usually, trustees can avoid preferential payments, meaning that they can undo them.  However, if you received new value for the transfer at the same time as the transfer, such as a payment that is cash on delivery, the trustee can’t avoid the transfer.  Also, if the transfer was made in the ordinary course of the debtor’s business or financial affairs, such as payments on utility bills, the payment can’t be avoided.  Some security interests are also protected from trustee avoidance actions.  Payments for domestic support obligations and payments made as part of a debt repayment plan are also protected.