Insider Payments/Messy Question

[987654]

OK, this is a bit of a mess. I use my boyfriend's mothers credit card to purchase business product. My supplier only accepts credit cards and I don't have one...I do have a check card, but often have to order product before the income from my credit card sales hit my account in order to have it in stock in time to sell it to the next person. You know, the old it takes money to make money hangup. I'm slowly moving out of that predicament and into better cash flow, but this situation has been a business saver and has kept me afloat.

Now I'm filing chapter 13, and have a history of writing her $2-3k/month in checks for this product. Giving this situation, how will the trustee see the payments to her? My fear is they will view it as a loan, and the payments as 'insider payments', which would be a HUGE MONGO GIGANTIC ISSUE for obvious reasons. These are legit ongoing business expenses, it's just that she's buying the product on my behalf to help me keep my business going.

Technically, the product is ordered in her name, comes to her house, I pick it up from there and I write her a check (or two) every month. I pay her off each month, so she won't be a creditor when I file. So one way to look at it is that I'm buying the product *from* her rather than reimbursing her.

Question is, will the Trustee see it that way? I'm going to run it by the attorney I am meeting next week to get the ball rolling, but was hoping for some input from the Bankruptcy Forum Brain Trust.

Thoughts? This is all so frustrating...you do what you can, and then all these little things creep up that show you've made even more bad decisions/mistakes. Ugh...

[lrprn]

Technically, the product is ordered in her name, comes to her house, I pick it up from there and I write her a check (or two) every month. I pay her off each month, so she won't be a creditor when I file. So one way to look at it is that I'm buying the product *from* her rather than reimbursing her. Question is, will the Trustee see it that way?

The debt is your boyfriend's mother, not yours. There's no insider preference if the debt isn't yours.

Your biggest problem is going to be how you are going to pay for this 'product' after you file. I don't think you will be able to list getting your business product this way and continuing to pay your BF's mother monthly as a legitimate expense.

This is something you need to discuss with during your 3-4 free initial appointments with experienced bk lawyers in your area. Be upfront and honest about what you've been doing so the lawyers can give you their best opinion about where you stand in this situation and how it might affect your filing.

[987654]

Thanks LRPRN. So even though the 'debt' was incurred on my behalf and I 'paid her back', because it was in her name it's not an insider payment situation? That would be great.

I'm almost to the point where the incoming business income is built enough to let me purchase everything on my own, which would remove her from the picture. There may be times when it's hard, but I will make it work.

I have my first initial consultation next Wednesday and plan to make a couple more. I will put this all on the table then Thanks.

[SMinGA]

In a sense, she is your supplier and you are buying product from her each month for your business. I imagine you can show some sort of paperwork that you are receiving the goods - inventory in/out records perhaps?

Paying for services/products is not a debt and should not be an issue. Just like paying your monthly utility bill is not a preferential payment, as you're paying for ongoing services.

But discussing this w/ multiple attorneys, not sure if they will agree with my reasoning, is important.

[frogger]

I do believe that you're going to find that business debt is different from personal debt. To keep the business going, you had to incur debt, and had to pay that debt. As long as you have the documentation, you probably have no problem.