Avoidable Transaction

Bankruptcy term referring to agreements and contracts that a bankruptcy trustee, receiver, or administrator has the power to cancel unilaterally on behalf of the bankrupt entity. Usually a bankruptcy laws will provide a set of statutory periods during which certain classes of transaction can be cancelled, usually 60 or 90 days, or 1 year depending on the type of transaction. Typically avoidable transactions are preferences (i.e., payments that favor one creditor or class of creditors over others); gratuitous transfers (i.e., transfers of assets for which no value was received); sales or transfers of assets for less than fair value; and transactions with insiders and parties linked to the bankrupt or its officers.

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