So I'm confused can the 20 day grace period be used on inventory as well?
For preferential and non preferential here is the breakdown:
The trustee will go back and look at 2 years from the date of filing to make sure there was no fraudulent transfers. If a preference is found the trustee can set it aside (payment taken back from the creditor who received it and becomes part of the bankruptcy estate).
A preferential payment is
1. A transfer made to or for the benefit of a creditor
2. On account of an old debt of the debtor
3. Made within 90 days prior to the filing of the petition (one year of creditor is an insider)
4. Made while debtor was insolvent AND
5. That results in the creditor receiving MORE than the creditor would have received in bankruptcy court.
Purpose of this: to prevent one creditor being preferred over others.
This relates to the purpose of prepaying or accelerating payments.
Exceptions: payment to a fully secured creditor (would've gotten paid first in full anyways), paying your current bills on time (ordinary course of bus), PMSI perfected within 30 days, consumer payments under $600, and domestic support obligations (ex. Child support/alimony)
.