Within the context of bankruptcy and insolvency laws, which of the following statements is TRUE?

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A preference occurs when the debtor pays one creditor, but not others, within a certain time prior to bankruptcy. This is considered unfair since it gives an advantage to one creditor over others. Preference payments can be undone by the bankruptcy court so that all creditors can be treated equally. The other statements are incorrect. Preferred creditors may have a higher priority for payment, but they are not entitled to be paid before all other creditors. Pro rata sharing means that each creditor is paid a percentage of what is owed to them, based on the amount of money available, not a fixed amount. Share exchanges may occur outside of bankruptcy, and liquidation can occur before or after a discharge from bankruptcy.

Within the Context of Bankruptcy and Insolvency Laws, Which of the Following