Post-Dated Checks

[spearmint]

Someone whose services I am employing (tax-related) is aware that I plan to file Ch13 soon. He obviously wants to get paid so he suggested that I send him four $500 postdated checks and will not file them until I say so.

Any comments?

[StartingOver08]

My comment - don't do it. If you owe him money to file your tax returns then he becomes a creditor in the Ch 13 so he can get paid. This is an insider payment as he is your tax preparer (I assume based on your comment)

[EricaCallaha]

I agree..Don't do it. Just include him in the bk.

Good luck.

[fltoo]

You are paying for a service, so this has nothing to do with an insider payment.

If you plan for him to cash every check before you file, you are okay. If not, how are you going to cover the check once you are in an active 13?

[StartingOver08]

Take a look at this link - it is very specific on what an insider payment is:

http://books.google.com/books?id=VBVATS7XSTUC&pg=PA52&lpg=PA52&dq=insider+payments+in+bankruptcy&source=bl&ots=gf_JPhof9W&sig=npVtvVRsDq4bZCFx_1mdKBYXh-4&hl=en&ei=dxS8SZLfO8-Ltgfu-6mcBA&sa=X&oi=book_result&resnum=4&ct=result

To paraphrase:
If a cash payment is made to a creditor on account within 90 days of filing or when the debtor is insolvent, this is a preferencial payment. However, if the creditor is a family member or close business associate, then it is an insider payment and the lookback period is one year.

[justbroke]

Simply, the person is a creditor. Whether they are insider or not (close business associate or friend or family) is for a judge to decide. Be careful in how you pay them. Post dated checks don't create constitute a contemporaneous exchange. That sum of money, $2000, is a lot of money in the Bankruptcy context. How are you going to even get this by the Trustee?

[fltoo]

If you pay for goods/services usually within 45 days, it is not a preferential payment. For example, if you pay your doctor 5000. for a surgery before you file, it is not a pref payment. If you owe him 5000. at the time you file and he hasn't been paid in say, 90 days, then it becomes a pref payment if you pay him.

At this point, the OP did not say when he plans on having the service provider cash these checks.

He actually does not have to say he is paying an upfront 2000. bill. He could be paying 500. each time a part of the service is completed.

[justbroke]

I'm still confuse as to whether it's a contemporaneous exchange of service for payment, or as fltoo eludes, is a service rendered over time. Either way... in the Chapter 13 context, it's best to determine how to pay for the service in the Chapter 13 context.

[fltoo]

Matter of semantics. Paying for goods and services within 30-45 days is a contemp exchange and cannot be avoided by the trustee as it is not a pref payment.

But, in agreement JB, OP needs to figure out how he is going to come up with the money in a 13 if he does not plan on fully paying the guy before filing.
Probably needs to include him as a creditor.

And if he does plan on paying him before filing, he needs to pay the entire bill within a safe time period.

[EricaCallaha]

After all the above comment....don't do it. You are paying someone for a service. $2000 is a lot of money in a bankruptcy. How are you going to come up with this money in the future for him to cash these checks? Since he is performing a service for you...he will become one of your creditors. If you are worried about him getting 100% paid, then let him get what he can in the bankruptcy, and then pay him in full after the bankruptcy is done. There is no law about that.

Good luck.

[BigJohn]

Someone whose services I am employing (tax-related) is aware that I plan to file Ch13 soon. He obviously wants to get paid so he suggested that I send him four $500 postdated checks and will not file them until I say so.

Any comments?

the problem with a post dated check is when the person goes to cash the check and there is not enough funds, you could, in worst case scenario, get arrested for passing paper.

[justbroke]

the problem with a post dated check is when the person goes to cash the check and there is not enough funds, you could, in worst case scenario, get arrested for passing paper.

HHM, had a very good teaser on here a couple of months ago. It specifically dealt with markers, but markers are (in many States), the same as checks.

The question is, if the check was post-dated and for contemporaneous services... and the person filed Bankruptcy before the payee cashed the check... is that punishable under State underlying non-Bankruptcy law.

This is getting good.

[fltoo]

JB, google Thomas vs. Money Mart

[justbroke]

JB, google Thomas vs. Money Mart

I don't need to. I know that one by heart! (I had a similar issue with a post-dated check to Amex who cashed it after I filed, and after I informed them... 7 days later as a matter of fact.)

However, in the Money Mart case, that was a payday loan.

Without even looking, that was a violation of automatic stay case. I so wanted to crush AMEX on a Stay Violation, but this Money Mart case is on whether the presentment of a post-dated check (or any check for that matter) is a violation. It is not because 11 USC 362 specifically covers the presentment and the "contact" afterwords to advise the person of the bad check. I hate that case.

[lrprn]

Someone whose services I am employing (tax-related) is aware that I plan to file Ch13 soon. He obviously wants to get paid so he suggested that I send him four $500 postdated checks and will not file them until I say so.

Any comments?

Unless you can fully protect a minimum of $2000 in your checking account on filing day with your state exemptions, it's a stupid idea.

There have been cases where filers sent mortgage or other legit payments that hadn't cleared the bank on filing day and the trustee took every extra penny over the allowed exempt amount so the asset payments bounced. Not a situstion you want to find yourself in.

And even if you can exempt $2K, forgive my bluntness but imho you are sliding dangerously close to scamming the system for your personal benefit here. You just asked in another thread about how to hide putting in carpet before filing....not exactly a 'filing in good-faith' thing to do either.

Planning your bk is perfectly fine, but what you are doing here is gaming the system. A sharp trustee can put you in a world of hurt if this comes to light.