Legal Definitions - Deprizio doctrine

The Deprizio Doctrine is a rule in bankruptcy law that states if a debtor makes a payment to an outside creditor more than 90 days before filing for bankruptcy, and that payment benefits an inside creditor, it can be considered a preferential transfer and can be voided.

For example, let's say a construction company owes money to both an outside supplier and an inside creditor, such as a family member who invested in the company. If the company pays off the outside supplier within 90 days of filing for bankruptcy, but not the inside creditor, the payment to the outside supplier can be voided as a preferential transfer because it benefits the inside creditor.

The Deprizio Doctrine is meant to prevent debtors from favoring certain creditors over others before filing for bankruptcy. It ensures that all creditors are treated fairly and equally in the bankruptcy process.