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Simple English definitions for legal terms
antecedent debt
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A quick definition of antecedent debt:
Antecedent debt is an old debt that may be used as consideration for a new promise if the statute of limitations has run out on the old debt. It can also refer to a debtor's pre-existing obligation that existed before transferring an interest in property. This type of debt is important in bankruptcy cases because for a transfer to be preferential, it must be for or on account of an antecedent debt.A more thorough explanation:
Antecedent debt is an old debt that may serve as consideration for a new promise if the statute of limitations has run on the old debt. For example, if someone owes you money from five years ago and the statute of limitations has expired, they may use that old debt as consideration for a new promise. This is called antecedent debt.
In bankruptcy, antecedent debt refers to a debtor's prepetition obligation that existed before a debtor's transfer of an interest in property. For a transfer to be preferential, it must be for or on account of an antecedent debt.
For instance, if a debtor owes money to a creditor and then transfers property to that creditor to pay off the debt, the transfer may be considered preferential if it was made on account of an antecedent debt.