A payment can look harmless when it is made, then come back to cost real money later. In bankruptcy, a preference payment is a transfer of money or property made by a debtor to one creditor shortly before filing that gives that creditor more than it would likely receive through the normal bankruptcy process.

Technically, the rule comes from 11 U.S.C. § 547 of the federal Bankruptcy Code. In general, a trustee may try to recover payments made within the 90 days before the bankruptcy filing, or within one year if the payment went to an insider such as a relative, business partner, or company officer. The point is to keep one creditor from getting favored treatment while others are left with less. Not every pre-bankruptcy payment qualifies; there are defenses for ordinary business transactions, new value given in return, and some other routine payments.

For a person dealing with an injury claim, this can matter in a couple of ways. If an at-fault driver, business, or insurer enters bankruptcy after paying one claimant, that payment may be challenged as a preferential transfer. On the other side, if an injured person later files bankruptcy after paying certain old bills, the trustee may review those payments and try to claw them back. That can complicate settlement timing, creditor pressure, and overall case value.