“Preferences” are regarded as unfair payments to certain creditors. Preferences in bankruptcy refers to the transfer of assets or money to a creditor in the period leading up to filing for bankruptcy. These creditors are getting preferential treatment at the expense of the other creditors.
Preferences are often paid to family members. It is illegal to make unusually large payments if you know that you will shortly be filing for bankruptcy, as these preference transfers reduce the assets which could be have been fairly distributed among all eligible creditors. The law therefore allows the trustee to regain the asset or assets through the courts, and the preferential transactions are set aside.