Interesting information I received today

[WillinVT]

I wrote to my lawyer on Monday morning asking a few questions about the bankruptcy forms I have been filling out.

One of the questions asked: Have you paid any creditor (unsecured) more then $600 in the past 90 days.

I was a little confused with this question because one of my unsecured creditors is a Capital One Unsecured Personal loan with a monthly payment of $557.28.

I finally received an email back from his paralegal this afternoon asking me why I have been paying $557.28 to an unsecured personal loan. I guess I did not provide her with enough information in my original email.

This is what she said:

The question is have you paid more than $600 and it appears you have seeing just one payment is $557. This will create a problem as the Trustee will most likely retrieve those funds and disburse amongst all creditors. The reasoning behind that is that you are preferring one creditor over another.

In response to what she said, I really don't see this as preferring one creditor over another because that was my minimum monthly payment and my last payment to Capital One was on March 17th, 2009. That was the same day I last paid all of my other unsecured creditors.

I guess if they are asking for 90 days, I will have to wait until June 17th or after to file, which isn't a big deal.

I am just curious how that would work. Would the trustee really go after Capital One to pay my other creditors like Juniper, Chase, HSBC and GE Money bank? If they did, how would that effect me?

Kind of weird if you ask me

[Recessionist]

Yes, it's possible it may be considered a preferential payment. However, it's not that you are not allowed to make such payments or that you will be "in trouble" for making the payment. If the Trustee feels it was preferential, he or she will retrieve it from the creditor, but that's a problem for the creditor, not you.

The real problem for you would be if you made a preferential payment to a friend or family member who loaned you money - that person might have to surrender the payment to the Trustee and that would seriously suck for them and damage your relationship.

[TEW]

preferential payment is 600 or more in the 90 days before filing. It's best if you stop paying all the unsecured creditors.

[WillinVT]

preferential payment is 600 or more in the 90 days before filing. It's best if you stop paying all the unsecured creditors.

This I understand. I think the paralegal thought I was still paying this creditor, which I am not. The last payment I made to them was in mid March and this was the same time I stopped paying all my unsecured creditors.

I don't plan on filing until mid June anyway, so the 90 day mark will have passed. If the trustee wants to go after Capital One and there is no involvement on my part, I really don't care.

I know about the borrowing money from relatives, friends, ect.. I borrowed $2400 from my parents back in 10/2008 and I do plan on paying it back, but that will happen after I am discharged. I have already told my parents that I will be filing and that I have to include them in my paperwork and they know that they can't receive any money from me until I am discharged. All is good!!!

[kennyd666]

preferential payment is 600 or more in the 90 days before filing. It's best if you stop paying all the unsecured creditors.

But what if you were paying a creditor that sued you? I have paid $600 a month to a debt collector before taking the advice of my lawyer and filing BK. I made 2 payments.....Feb. and March.....will be filing this month......is this going to be an issue?

[TEW]

If there is no garnishment I would stop paying them. It is all going to be discharged.

[kennyd666]

If there is no garnishment I would stop paying them. It is all going to be discharged.

There is no garnishment....it was a negotiated settlement my lawyer worked out.....i was trying to pay back my debts from my divorce. She filed BK and they came after me for her debts too.....i wanted to do the right thing and pay them.....but i am on a pension and it got over-whelming pretty fast. I am well under the median in MI and the means test is good for me too. No assets of any kind....

My lawyer said i may even get back 1 or both payments i made to them......do you think this is possible?

Thanks for responding......

[TEW]

I don't know if you will get the money back your lawyer may know some way to do that.
Is this your BK lawyer?

[queenfluff]

My lawyer asked me this too but mine are all cc's. And for two of the them I paid way more than $600 for the 90 days but this is because for one of them my minimum payment for the month is almost $600. For the other card I paid more than the minimum a few times because it was close to the line and I didn't want it to go over with finance charges. But I was only paying my minimums for the most part on the cards but some cards have higher minimums than others so I would certainly hope that this is not considered preferential payment because honestly I would have loved to pay less than the minimum on that Citibank but I was just trying to keep my accounts out of default.

Seems weird that paying the minimums would be considered preferential payment? Even though they were more than payments to my other creditors. My lawyer didn't say anything about my amounts so my guess is there is no problem.

[kennyd666]

I don't know if you will get the money back your lawyer may know some way to do that.
Is this your BK lawyer?

Yes....same lawyer.

[StartingOver08]

Interesting your lawyer should say that ....because once you file you have created a BK estate (all of your creditors). If you have preferential payments the Trustee might go after the payments to distribute to the BK estate, but the Trustee is not going to redistribute payments to the debtor. You might want to clarify this with your attorney.

[epiphany]

It is all going to be discharged.

Agreed. You need to stop paying them if you haven't already.

Even a garnishment will be discharged/dismissed assuming all is discharged and dismissed.

As far as preferential payments go, don't worry about it unless you have made those to family or loved ones. That's between the trustee and the payee to work out if that has occurred. If the large payments were to credit card companies, you have nothing to worry about. You won't even hear about it.

ep

[SobStory]

This has been a helpful discussion for me. We will file Ch 7 soon. I stopped paying most CCs back in Dec. We have a contracting business. We were waiting to be paid on a job and needed to buy matls. We charged about $2,000 on Home Depot because there was absolutely no other way to get matls. I plan to pay them because we have since been paid. (I think this would otherwise be fraud since we know we are going to file.) This is a commercial charge.
We will file personal first but business soon after. I avoided all other CC charges but it was either this or no work. What are the implications?
Thanks for any advice.