What is a preference claim?

Minneapolis Bankruptcy attorney Steven Silton defines preference claim in the context of bankruptcy law.

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Transcript:

A preference claim is a payment that’s made by the debtor outside of the ordinary course of business on an existing antecedent debt in which the creditor receives more money than they otherwise would have in whatever bankruptcy process they’re in. Those claims can be essentially brought back into the bankruptcy estate pursuant to the preference powers, the avoidance powers in the bankruptcy code. So if someone has received a preference payment, the Chapter 7 trustee or the debtor in possession can make a demand on and if necessary go to court and receive and order forcing that money to be repaid to the estate.