economy
January 22, 2026
What is the 90-day rule for Chapter 7 bankruptcy?
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TL;DR
- Inquiries about personal bankruptcy are rising due to economic pressures like inflation and high interest rates.
- Chapter 7 bankruptcy, or liquidation bankruptcy, allows borrowers to discharge unsecured debts.
- The "90-day rule" (preference period) allows a bankruptcy trustee to review and potentially reverse payments of $600 or more made to creditors within 90 days of filing.
- This rule ensures fair distribution of assets among all creditors, preventing preferential treatment.
- Payments made in the ordinary course of business are typically exempt from reversal.
- The preference period extends to one year for payments made to "insiders" such as family members or business partners.
- Making large or accelerated debt payments before filing bankruptcy can backfire, leading to clawbacks and increased legal costs.
- Consulting with a debt expert or bankruptcy attorney is recommended to navigate these rules and understand timing strategies.
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