Suppose you have issued bounced checks to purchase certain assets like your car. You may decide to make good your bounced check before filing for bankruptcy in order to avoid repossession by your creditor. However, if such a repayment is made within 90 days of filing for bankruptcy, the bankruptcy judge may classify your payment as “avoidable preference” if he or she feels the payment gave preference to your secured creditor and jeopardized your unsecured ones. In such a case, the bankruptcy judge may order the creditor to return the payment and retain the debt in your bankruptcy estate.
However, there are exceptions to the rule. Suppose your creditor has filed a lien on your property and in order to remove the lien, you pay up your debt. If the creditor releases the lien after the bad check has been made good, the bankruptcy judge may allow the payment.
