Protection of Creditors

The majority of people who file for bankruptcy are honest and hard-working. The Act affords them an opportunity for a new start. However, there will always be a small minority who may try to abuse the system. With this in mind, adequate safeguards are in place to protect the rights of creditors.

Should a debtor attempt to transfer or conceal assets or grant substantial preferential treatment in the repayment of certain creditor's debts, the courts will direct the Trustee to make a recovery on behalf of the creditors. This could adversely affect your discharge. Examples of these might be where you transfer real estate to a relative just prior to filing for bankruptcy or where security is given for an old unsecured debt to give that creditor priority over other creditors. If the above actions occurred within a certain period of time prior to the date of bankruptcy and at a time when you knew yourself to be insolvent or if the transaction rendered you insolvent, the court will reverse the settlement or fraudulent preference.