Voidable preference

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What happens if you create a security interest over existing indebtedness, and then go bust within a period specified by statute ( usually 6 months of thereabouts). The law will set aside such a security interest, supposing that in creating it a debtor was acting with base motives: preferring one of his buddies, to whom he owed money, over his legion other creditors, when the writing on the wall or his solvency made itself suddenly all too painfully clear.

See also

• bankruptcy
• Carve-in
• Slavenburg