The ninety day rule: when your lien becomes a preference

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The same material, read aloud and told more loosely than it is written. Nothing is said in it that this page does not also say.

What a preference is

A preference is a transfer that paid one creditor better than the bankruptcy would have, made close enough to the filing that the law assumes something was wrong. And creating a lien is a transfer.

Creating a lien is a transfer. The Bankruptcy Code counts the creation of a lien among the ways a debtor parts with an interest in property, and a judicial lien is one obtained by judgment, levy or other legal process. 11 U.S.C. 101(36)¹ and 101(54). So docketing or recording a judgment lien is a transfer of an interest of the debtor in property, which is the thing a trustee is allowed to unwind.

Five conditions have to line up. The transfer went to or for the benefit of a creditor, for a debt the debtor already owed, while the debtor was insolvent, inside the reach-back period, and it left the creditor better off than it would have been in the comparison the subsection sets out. 11 U.S.C. 547(b)². Miss one and there is no preference.

Insolvency is the condition a creditor does not have to fight over. The debtor is presumed insolvent on and during the 90 days before the petition. 11 U.S.C. 547(f). On the rest, the trustee carries the burden of proving the transfer avoidable, using reasonable due diligence and weighing known defenses. 11 U.S.C. 547(b), 547(g). The creditor who wants out carries the burden of proving a defense under 547(c).

Ninety days, one year for insiders

Ninety days for an ordinary creditor, a full year for an insider. The difference is who you were on the day the lien attached.

Timing asks whether the transfer was made on or within 90 days before the petition. 11 U.S.C. 547(b)(4)(A). Day 89 is inside the window for every creditor. Day 91 is outside it, and the debtor cannot pull it back, unless the creditor was an insider when the transfer was made. Then the window runs from 90 days back to one year. 11 U.S.C. 547(b)(4)(B).

Insider is a defined word, and it is broader than it sounds. Where the debtor is an individual, it reaches a relative of the debtor, a general partner, a partnership in which the debtor is a general partner, and a corporation of which the debtor is a director, officer or person in control. 11 U.S.C. 101(31)(A). Relatives count out to the third degree, by blood or marriage, or a step or adoptive relation within it. 11 U.S.C. 101(45). Where the debtor is a corporation, insiders include its directors, officers, persons in control, its general partners and their relatives, and affiliates and managing agents count as well. 11 U.S.C. 101(31)(B), 101(31)(E), 101(31)(F).

That longer window has a limit worth knowing. If a transfer made between 90 days and one year is avoided because it benefited an insider creditor, the trustee may not recover from a transferee who is not an insider. 11 U.S.C. 550(c)³. So the extra months reach the insider who gained, not a stranger downstream.

The day the lien attached is the day the clock reads

Measured from when the transfer was made, which for a lien is when it became good against a later buyer, not the day the judgment was signed.

For the preference rule, a transfer of real property other than fixtures is perfected when a bona fide purchaser from the debtor could no longer take a superior interest. 11 U.S.C. 547(e)(1)(A). For a fixture or other property it is when a simple contract creditor could no longer get a superior judicial lien. 11 U.S.C. 547(e)(1)(B). The transfer counts as made when it took effect if perfected within 30 days. Otherwise it is dated when perfected, or immediately before the petition if it was never perfected in time. 11 U.S.C. 547(e)(2). So the day the lien went on the record is usually the day the clock reads.

Two conditions move that date. No transfer is made until the debtor has acquired rights in the property. 11 U.S.C. 547(e)(3). And the recording office sets the moment itself. In Florida an instrument is recorded, and is notice to all, when the clerk affixes its register number, the lower number first. Fla. Stat. 695.11⁴. In New York an instrument is recorded as of the time it is delivered, in the order delivered. RPL 317⁵. Which recording act creates the lien is the same question that fixes its preference date.

In Florida the lien attaches when a certified copy is recorded in the county, provided the judgment states the lienholder's address or an affidavit of that address is recorded with it. Fla. Stat. 55.10⁶. New York priority starts when the judgment is docketed with the clerk of the county where the land sits. CPLR 5203⁷. One of those dates, placed against the petition date, is what puts a lien inside the window or outside it.

The exceptions and the deadline

Some transfers are off limits even inside the window, and the trustee has only so long to bring the action at all.

Certain transfers survive. The fixing of a statutory lien that is not avoidable under section 545 is excepted, and a statutory lien is one arising solely by force of a statute, which the Code holds apart from a judicial lien. 11 U.S.C. 547(c)(6), 11 U.S.C. 101(53). Excepted too is a bona fide payment of a domestic support obligation. 11 U.S.C. 547(c)(7). And a floor keeps small transfers out: under $600 for an individual with primarily consumer debts. 11 U.S.C. 547(c)(8).

Where the debts are not primarily consumer debts, the floor is larger and it moves. It is adjusted every three years, and for cases commenced on or after April 1, 2025 it is $8,575, up from $7,575, under the Judicial Conference's 2025 notice. 11 U.S.C. 547(c)(9). An adjustment never reaches a case already filed. 11 U.S.C. 104(c)⁸. The $600 consumer floor is written flat in the statute, and the sections 104(a) lists for adjustment include 547(c)(9) but not 547(c)(8). 11 U.S.C. 104(a).

A preference action has an outside date. It may not be started after the earlier of two times: two years after the order for relief (or one year after the first trustee is appointed, if that is later and inside the two years), and the closing or dismissal of the case. 11 U.S.C. 546(a)⁹. After that, the lien is not reachable as a preference however clearly it would have been inside the window.

What this does not settle

The 90 day question is not the only way a lien can fall, and this page answers only the window.

Recording outside the window answers the preference question and nothing more. At filing the trustee already stands in the shoes of a judicial lien creditor and a bona fide purchaser of the debtor's real property as of that moment. 11 U.S.C. 544(a)¹⁰. And the debtor may avoid a judicial lien to the extent it impairs an exemption, which is a separate attack that does not care which day the lien was recorded. 11 U.S.C. 522(f)(1)¹¹. Safe from one is not thereby safe from the other.

The petition itself freezes things. Once it is filed, an act to create or perfect a lien against estate property, or against the debtor's property for a pre-filing claim, is stayed, subject to the narrow perfection exception. 11 U.S.C. 362(a)(4)¹², 362(b)(3). And a lien avoided as a preference is preserved for the estate, and property so preserved becomes estate property. 11 U.S.C. 551¹³, 11 U.S.C. 541(a)(4)¹⁴.

Whether one lien recorded two months before a filing is a preference is a question for counsel with the proof in front of them: the debtor's solvency, the five conditions, any defense, whether the creditor was ever close enough to the debtor to be an insider. What a page can do is narrower. It can tell you that the window is counted back from a date you did not choose, and that the day your lien went on the record is the day the trustee reads off the clock.