Preference Legal Meaning and Definition

Here is a simplified definition of the legal term Preference.

Preference (noun)

In the context of bankruptcy law, a 'preference' refers to the act of favoring one creditor over others by paying them a higher portion or all of the debtor's available assets, usually before filing for bankruptcy. This act is considered illegal, as it goes against the principle of fair distribution among all creditors. The court, not the debtor, has the authority to decide the priority of payments, often choosing to pay secured creditors before general creditors.