Question

Before filing a Chapter 7 bankruptcy petition, Tricia sells her diamond watch to Dale Kehoe BMW, whom she owes for the purchase of a used car because Tricia and Dale are close friends and neighbors. The transfer:
a. is a fraudulent transfer.
b. is fine because Dale Kehoe BMW is a secured creditor.
c. is a preference that can be avoided.
d. is fine because the diamond watch was exempt property.

Answer 1

The transfer is a preference that can be avoided.

Answer: Option C

Explanation:

When Tricia sells her diamond watch to Dale Kehoe BMW than it is called an “avoidable preference” which means the transfer of payment processed by debtor to a creditor, this is decided by bankruptcy trustee for reimbursement of assets creditors and recover benefit of bankruptcy property.

This is performed for impartially distribution of debtor’s assets to the creditors through proper scheme. In this case, the procedure Tricia opted may benefit Kehoe more than other but through bankruptcy proceeding the trustee would have involved the watch with rest of the property of Tricia and initiated uniform distribution.