Things to be aware of if facing bankruptcy 5

For the next installment of my warnings of things to avoid pre-bankruptcy, I want to speak to a big temptation. Many people, by the time they make their way to me, have already exhausted not only their own resources to stay fiscally afloat, but also the resources of friends and family. So, these same people who were responsible enough to do all they could to pay their debts, feel beholden to their friends and family to pay them back. I understand that. I would feel the same way. However, this can be hurtful to those same friends and family.

To pay any single creditor more than $600.00 in the ninety (90) days preceding bankruptcy is a preference. The trustee in your bankruptcy has the right to pursue recovery of those payments. When the payments were made to a friend or family member (an insider), that 90 day time-frame gets extended out a LONG way. In fact, you are required to self-report any such transfers occurring in the last year prior to the bankruptcy. However, the bankruptcy code actually allows the trustee to use state law in determining a preference to an insider. That means that in Kentucky, the trustee could pursue transfers to insiders made in the five (5) years preceding bankruptcy.

Now, do not panic. The transfer would have to be pretty substantial for a trustee to want to go after one really old. The point, though, is that you are not really doing your friends or family a favor by trying to pay them prior to the bankruptcy. This is because the trustee could go yank those funds right back from them. Then neither of your are helped. Rest assured, after the bankruptcy is completely over, you can pay whomever you like. They just cannot force your to pay them.