large purchases before filing

[IOIOIO]

Aside from asking about preferential payments to creditors, the Nolo book says the trustee might ask about payments made to anyone who's not one of my regular creditors if the amount is over $600 and happened within the past year. If I've purchased large amounts of living necessities in bulk for amounts over $600, how much of a problem will that be? All that will show is a PayPal transfer from my bank account to other individuals--I don't have receipts and can no longer prove what the purchases were for. I realize to play it safe I can wait to make sure a year has passed since the last large transfer before filing. How big of a problem would this be if I don't wait the full year?

[lrprn]

I'm lost here, IOIOIO....how does the "last large transfer" relate to purchasing more than $600 for bulk living necessities? Are you saying you used money obtained in a transfer between accounts to buy these living necessities? Where does the $600 (the amount that defines preferential payments to a creditor during the 90 days prior to filing) come into play buying living necessities, not paying a creditor??

[CPO]

On the "Statement of Financial Affairs" item 3. "Payments to creditors" it states "list all payments on loans, installment purchases of goods or services, and other debts to any creditor made within 90 days immediately preceding the commencement of this case if the aggregate value of all property that constitutes or is affected by such transfer is not less than $600."

Buying $600 worth of bulk living necessities to folks you payed via PayPal does not constitute a payment to one of your creditors in excess of $600.

I don't see the problem.

CPO

Additionally, the Trustee might ask you this question. They could ask you anything, just tell the truth.

But make absolutely sure you understand the question, first.

It is listed as a question the Trustee may ask you in the Nolo book (pg.214), however those questions must be placed in the context of the facts of your particular petition.

CPO

[IOIOIO]

lrprn, I think CPO answered it, but to answer your question, the Nolo book gives a list of what the trustee will ask you (regarding regular creditors, etc) followed by a list of what the trustee may ask you. On that second list, question #7 asks "Have you made any large payments, over $600, to anyone in the past year?" I'm saying I've paid people via PayPal, which shows on my bank statement as a transfer of funds already in my account to another person/company who aren't regular creditors or "insiders" close to me in some way. I have no way of proving what these payments were for, and was wondering if such transfers present some kind of problem.

CPO is saying this kind of transfer isn't listed in "Statement of Financial Affairs," but I was still curious to know if a trustee might have a problem with it for some reason. Since Nolo lists the question, I thought I should be properly paranoid.

[lrprn]

I was still curious to know if a trustee might have a problem with it for some reason. Since Nolo lists the question, I thought I should be properly paranoid.

Thanks for explaining why you asked, IOIOIO. Glad CPO was able to answer your question.

The $600 question Nolo mentions is sometimes asked by trustees during the 341 meeting to expose preferential payments of at least $600 to insiders or uncover specific non-secured creditors who have been paid at least $600 within 90 days of filing when others have not. Paying for regular living expenses is not the same, so this won't be a problem for you. If you are still unsure, ask your lawyer the best way to answer this question if it comes up during your 341.

[CPO]

Properly paranoid is good...

In many ways, we don't really understand just what the Trustee is going to say or do.

However, we know the Trustees actions are governed by the law and the court, so I'd say they pretty much stay in line with their local rules and that of the BK court.

Overall, on this specific question, I believe the intent of the disclosure is to inform the Trustee if you have made "preferential" payments to any creditor, be it your parents or your favorite credit card...

The BK7 Trustee's role is to liquidate your nonexempt assets so as to maximize the return to your unsecured creditors. First, the Trustee liquidates the debtor's nonexempt property, property you own free and clear of any lien, and property with a market value above the amount of any security interest, lien or exemption.

Then the Trustee will pursue any lawsuits belonging to the debtor to recover money or property under the Trustee's "avoiding powers."

I'm sueing some credit collectors so I will get hit here myself.

These powers include the right to set aside preferential transfers made to creditors within a certain number of days before the filing of the bankruptcy, and the power to pursue nonbankruptcy claims available under state law.

Retreiving those preferential transfers allows the Trustee to distribute that money to your unsecured creditors, without favoritism.

So, as you can see, purchasing bulk living items from a number of vendors in which you payed via PayPal is not a "preferential transfer" to one of your creditors per the BK rules.

If the Trustee asks, you can always respond with the idea that "I have little cash to spare. I thought it would be a good idea to stock up on living essentials before I turn my finances over to the Trustee for possible distribution. I must feed my family."

The Trustee will accept that.

Just understand the Trustee does not really want to know that.

The Trustee wants to know if you played favorites with your payments to any one of your creditors.

That's it.

Regards,

CPO