Commercial Morality, the Merchant Character, and the History of the Voidable Preference
American bankruptcy law has never decided what to do about the crucial but elusive concept of the voidable preference. Defined in the most roughly general terms, a preference has a few basic elements: It is a transfer of money or of some interest in property by a debtor to a creditor to settle an antecedent debt; it occurs when the debtor faces imminent bankruptcy; and it benefits that creditor to the prejudice of other creditors by granting the favored creditor a greater share of the diminished assets of the debtor than that creditor would enjoy under the formal system of bankruptcy distribution.' Preference doctrine would seem to be a central part of bankruptcy law. If the general purpose of bankruptcy law is to ensure a ratable distribution of the debtor's assets among the creditors,2 preference law would seem, by definition, to be a primary instrument for achieving that goal. Indeed, the preference, unlike its somewhat mismatched partner, the fraudulent conveyance, is strictly a creature of bankruptcy law, rather than a part of nonbankruptcy commercial law that simply receives special enforcement in the bankruptcy process.3 Preference law, however, reflects a kind of insecurity about the formal process of bankruptcy. Bankruptcy law enforces its principle of ratable distribution at the technical point when the petition is filed. But preference law then sets a still earlier moment at which the debtor's estate faces a risk of dismemberment. At that earlier moment, preference law imposes a duty or sanction on the debtor or individual creditors to preserve the estate so that, when the petition is filed, the trustee