How far back can a trustee look?

Ninety days before the date the petition was filed for an ordinary creditor, and between ninety days and one year before that date if the creditor was an insider at the time of the transfer (11 U.S.C. § 547(b)(4)). Insider is a defined term at 11 U.S.C. § 101(31), and for an individual debtor it includes a relative.

Can a garnishment be a preference?

Yes. 11 U.S.C. § 547(b) reaches a transfer of an interest of the debtor in property, and nothing in the elements requires the debtor to have acted voluntarily. Wages taken by garnishment or funds taken by levy can meet the definition if the remaining elements are present. Whether they do in a particular case is a question for a lawyer.

Glossary

Preference

A preference is a transfer of the debtor's property to a creditor, on account of an earlier debt, made while the debtor was insolvent and within 90 days before the bankruptcy filing — one year if the creditor was an insider — that let the creditor receive more than it would in a Chapter 7 distribution. A trustee may seek to avoid it under 11 U.S.C. § 547(b).

Key points

A preference is defined by 11 U.S.C. § 547(b), which lists five elements a trustee must establish before a transfer can be avoided.
The lookback is 90 days before the petition date for ordinary creditors and up to one year for insiders, a term defined at 11 U.S.C. § 101(31).
A transfer need not be voluntary: a garnishment or levy is a transfer of an interest of the debtor in property under 11 U.S.C. § 547(b).
Section 547(c) sets out defenses, including contemporaneous exchanges for new value and payments made in the ordinary course.
Avoiding a transfer targets the creditor who received it — under 11 U.S.C. § 550(a) the trustee recovers the property or its value for the estate.

If a trustee or a lawyer has used the word "preference" about a payment you made before filing, they are describing a specific set of elements in the Bankruptcy Code, not an accusation of wrongdoing. The word covers ordinary conduct — paying back a relative, or having wages garnished. Here is what the term means and where it comes up.

What does "preference" mean in bankruptcy?

A preference is a transfer that meets every element of 11 U.S.C. § 547(b): a transfer of an interest of the debtor in property, to or for the benefit of a creditor, on account of a debt the debtor already owed, made while the debtor was insolvent, made within 90 days before the petition date (or between 90 days and one year if the creditor was an insider), and one that enabled the creditor to receive more than it would have received in a Chapter 7 distribution had the transfer not been made.

The elements are cumulative. A payment inside the 90-day window is not a preference on timing alone; each of the five elements has to be present. "Transfer" is defined broadly at 11 U.S.C. § 101(54) to include every mode of disposing of property or an interest in property, direct or indirect, voluntary or involuntary.

Why does it matter in a bankruptcy case?

Bankruptcy aims to repay creditors in an orderly manner from whatever property is available (COB official page — Understanding Bankruptcy). A payment that leaves one creditor better off than the others would receive in a distribution cuts against that, so 11 U.S.C. § 547(b) lets the trustee undo it and bring the money back.

The consequence lands on the creditor who received the transfer, not on the debtor's right to relief. Under 11 U.S.C. § 550(a), once a transfer is avoided the trustee may recover the property, or its value if the court so orders, from the initial transferee or the entity for whose benefit the transfer was made. So a relative or a landlord you paid before filing can be asked to return the money to the estate. That is usually why the subject comes up in a consumer case at all.

How does a preference claim work in practice?

The trustee identifies candidate transfers from the schedules and the statement of financial affairs, and from questions asked under oath at the meeting of creditors. Under 11 U.S.C. § 547(b), the trustee must act based on reasonable due diligence in the circumstances of the case, taking into account a party's known or reasonably knowable defenses under subsection (c).

There are deadlines. An action under § 547 may not be commenced after the earlier of two years after the order for relief, or one year after the first trustee's appointment or election if that occurs within the two-year period, or the time the case is closed or dismissed (11 U.S.C. § 546(a)).

Subsection (c) supplies defenses — among them a substantially contemporaneous exchange for new value, and a payment of a debt incurred and made in the ordinary course of business or financial affairs of both the debtor and the transferee.

What do people get wrong about preferences?

Three misunderstandings are common.

First, that a preference requires bad intent. The elements in 11 U.S.C. § 547(b) say nothing about the debtor's motive. Paying back a family member because it felt right can still meet the definition.

Second, that it has to be something the debtor chose to do. It does not. A garnishment or a levy is a transfer of an interest of the debtor in property and can fall within § 547(b).

Third, that a preference and a postpetition transfer are the same thing. They are governed by different sections: § 547 reaches transfers before the petition, while 11 U.S.C. § 549 covers unauthorized transfers of estate property after the case begins.

Whether a specific payment meets the elements, and which defense applies, is a question for a bankruptcy lawyer looking at your records.

Insider status is defined at 11 U.S.C. § 101(31) and includes a relative of an individual debtor.
An avoided transfer is preserved for the benefit of the estate under 11 U.S.C. § 551.
State exemption law can interact with § 547 — for example, S.D. Codified Laws § 43-45-14. Check your state page.

Frequently asked questions

How far back can a trustee look?: Ninety days before the date the petition was filed for an ordinary creditor, and between ninety days and one year before that date if the creditor was an insider at the time of the transfer (11 U.S.C. § 547(b)(4)). Insider is a defined term at 11 U.S.C. § 101(31), and for an individual debtor it includes a relative.
Can a garnishment be a preference?: Yes. 11 U.S.C. § 547(b) reaches a transfer of an interest of the debtor in property, and nothing in the elements requires the debtor to have acted voluntarily. Wages taken by garnishment or funds taken by levy can meet the definition if the remaining elements are present. Whether they do in a particular case is a question for a lawyer.
Does the creditor have to give the money back?: Only if the transfer is actually avoided. 11 U.S.C. § 547(c) lists defenses, including a substantially contemporaneous exchange for new value and payments in the ordinary course of business or financial affairs. Where a transfer is avoided, 11 U.S.C. § 550(a) allows the trustee to recover the property or its value from the initial transferee for the benefit of the estate.

Sources

By Antonio G. Jimenez, Esq. · Florida Bar No. 21022

Sources verified July 28, 2026 · How we verify

Every figure on this page is drawn from a primary legal source and checked against our canonical legal database before publication. Bankruptcy.law is not a law firm and does not provide legal advice.