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When will a third party payment be a preference?

Often debtors will finally agree to pay debts in circumstances where there is a possibility that the payment could later be clawed back as a preference.

One strategy to minimise the risk is to require the payment be made by a solvent third party (and not by the debtor). However, the strategy will only be effective in certain circumstances and the third party must not be discharging a debt to the insolvent debtor.

This article reviews two recent cases in which creditors received payments of old debts from solvent third parties and were able to successfully resist applications by a bankruptcy trustee and liquidator who were seeking to claw back the payments as a preference.  

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