DeAndre has 10 general, unsecured creditors. Most of these are credit card companies, but one is a small local bar which has allowed him to run up a line of credit. He has decided to file for bankruptcy, but two weeks before doing so he pays off in full his tab at the local bar so that he can stay in good standing with them. Assuming that the trustee challenges the payment to the local bar, which of the following is correct?
A. The payment is legal and the trustee will not be able to recover from the owner of the bar, as the debt was legally owed
B. The payment is a fraudulent transfer and the bar owner must give the money to the trustee
C. The payment is a preference and the owner of the bar must pay the money to the trustee
D. The payment is allowable under bankruptcy law since debts owed to restaurants and bars are non-dischargeable
E. The payment is allowable as DeAndre has fewer than 12 general, unsecured creditors
Answer: C. The payment is a preference and the owner of the bar must pay the money to the trustee
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