Definition - What does Insider mean?

In terms of bankruptcy, an insider is a creditor who was given preferential treatment in terms of being repaid first or most often. Insiders are normally those who are associated with the bankrupt entity or individual (such as relatives or close friends). This calls into question the validity of the order or frequency of the payments they receive. Many bankrupt individuals will attempt to send money to family and friends in the months leading up to a bankruptcy in order to potentially divert finances away from liquidation.

Justipedia explains Insider

If the bankruptcy court or Trustee finds that insider relationships exist between any creditor and the bankrupt person, they may claw back all payments made within a one-year time period. The Trustee may decide that only a portion of the payments were properly made. If a special or close relationship exists between the bankrupt person and a creditor, then this will be reviewed and monitored closely in order to avoid insider relationships and transactions.

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