Insider payment look back 1or2 years?

[MakinMeCrazy]

Hi again.....
I;ve really gotten into this research since we retained a BK lawyer......here is my question. Just a few minutes ago, i was on a BK page I found on the net..according to them the LOOKBACK period is now 2 years instead of ONE for "insider" payments.

They state that the Bankruptcy reform bill in 2005 changed it from one year to two!!! Is this correct? I hope not!

[backtoschool]

Payments on loans to an insider go back one year.

Any transfer of property to an insider like transferring a car or land (fraudulent conveyances) goes back two years.

[AngelinaCatHub]

I have looked everywhere as Googled, and only one year seems to pop up. "Justbroke" is likely to correct me if I am wrong. Hope he chimes in with a yeah or nay to my research. 'Hub

[AngelinaCat]

It can be up to two years, though it probably is not utilized unless the trustee has reason to think that that much effort is necessary.

We had a couple of insider payments that were made about five months before we filed. This happened thanks to our ignorance and the lack of communication/education by our attorney. Our trustee conducted a 2004b Exam, that looked specifically at those two payments and nothing else. He did not go any further back in our financial history.

Good luck!

[justbroke]

For preferential payments, the lookback is one year. This comes from 11 USC 547(b)(4)(B)... "between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider"

Fraudulent transfers can go back two years. Fraudulent transfers are of the type generally used to "hide" assets from creditors, such as "giving" a family member a car or money (so the creditors can't get it). This is under 11 USC 548.

I think the distinction between a transfer and payment are very thin. A payment is a transfer of property, usually for a contemporaneous exchange (payment) to receive something of equivalent value. If it was for value received (fair value), the Trustee and Code doesn't consider it fraudulent. This is why everyone asks if you sold that car, boat, whatever, for fair market value!

The problem is when you dispose of property, with the intent of defrauding of hindering creditors from being able to collect. That would fall under the fraudulent transfers and these are voidable by the Trustee and the Trustee can go back 2 years on those.

[AngelinaCatHub]

Thank you JB, I knew you'd come through. 'Hub

[MakinMeCrazy]

I can always count on this forum ...thank you all so very much, I do have one more thing I'd like to ask.....when you say fradulent conveyence to relatives to HIDE money ...WHAT IF..........it wasn;t hiding at all but just something that for once in your life you wanted to do for your adult child.......what happened was, I think most know my situation already..but....what happened was, my hus retired with drawing out of his state pension a huge sum of money, some went for bills, some for gambling (i know).but we gave our son something we could NEVER do before, we gave him a gift a TRUE gift of $5000....the look on his face. PRICELESS..........so we truely were not trying to hide it , we just wanted for once to be able to give back to him for being such a wonferful son and great guy........at that time we defineatly were not insolvent.....again thank you all very very much........

[justbroke]

I can always count on this forum ...thank you all so very much, I do have one more thing I'd like to ask.....when you say fradulent conveyence to relatives to HIDE money ...WHAT IF..........it wasn;t hiding at all but just something that for once in your life you wanted to do for your adult child.......

It doesn't matter. It's constructive fraud, even though you don't have any intent. The Trustees have gone after cars that were gifts to teenage children of the Debtors as graduation presents. So, when we stay fraudulent conveyance, we don't mean to say you had any intention. However, if you weren't paying your unsecured creditors, yet gave away property/money... this is what the Trustee looks for.

[nickifan]

It doesn't matter. It's constructive fraud, even though you don't have any intent. The Trustees have gone after cars that were gifts to teenage children of the Debtors as graduation presents. So, when we stay fraudulent conveyance, we don't mean to say you had any intention. However, if you weren't paying your unsecured creditors, yet gave away property/money... this is what the Trustee looks for.

Let's say you gave a desperate relative money ($10K in checks or cash over a year's period, last check about 10 months ago), BUT were still paying all creditors?? Is that the difference?

And if you file BK, is it better for that to have been a GIFT or LOAN if you're ever asked?? I assume GIFT, or else a loan would be an "asset"? (Can't figure out how it is if that person will not be able to repay for a long time....)

Also...if friends loan YOU money, and it is a LOAN that you intend to repay eventually...does it still have to be technically "charged off" in a Ch 7?
This is such a confusing point to me.

[MakinMeCrazy]

thank you.......I think I understand better now.......I was indeed paying all creditors.I never missed any payments until this month, This month is the first time ever that I got behind in my bills, due to my husband not being able to find a small job to subsidise our pension. Infact when we received the money, I paid several creditors more than what I gave my son, and most of the rest got larger than usual minimum payments for several months....

[justbroke]

Let's say you gave a desperate relative money ($10K in checks or cash over a year's period, last check about 10 months ago), BUT were still paying all creditors?? Is that the difference?

it depends to what extent you paid the other creditors? Minimum payments? The Trustee or creditor would need to prove that you preferred them over your other unsecured creditors.

And if you file BK, is it better for that to have been a GIFT or LOAN if you're ever asked?? I assume GIFT, or else a loan would be an "asset"? (Can't figure out how it is if that person will not be able to repay for a long time....)

If you're talking about the debtor loaning money... the Trustee specifically asks "does anyone owe you money"!

Also...if friends loan YOU money, and it is a LOAN that you intend to repay eventually...does it still have to be technically "charged off" in a Ch 7?

Yes, your liability to pay the friend back is "discharged" in the Chapter 7. However, after discharge, you can pay them back if you like.

[nickifan]

it depends to what extent you paid the other creditors? Minimum payments? The Trustee or creditor would need to prove that you preferred them over your other unsecured creditors.


For a while several creditors got BIG payments (e.g. $1-4K in my attempt to reduce debt) before I resumed minimum payments...but the relative got a few big checks too. But again, this will have been more than a year previous to filing.

If you're talking about the debtor loaning money... the Trustee specifically asks "does anyone owe you money"!
.

[B] So the answer is No if you decide the relative got a "gift"? What's the practical application of it being a loan -- if it is -- if the person simply cannot repay it to the (filing) debtor??

[justbroke]

So the answer is No if you decide the relative got a "gift"? What's the practical application of it being a loan -- if it is -- if the person simply cannot repay it to the (filing) debtor??

Be careful. Gifts are still transfers of property. Many folks don't even think that "money" is personal property. When you gift large quantities of money to a relative, it could be considered a conveyance or transfer or property.

The issue is always, are you doing this so that your creditors can't get to it. Or, did your creditors suffer because you made that transfer.

Rather than get people all concerned about providing gifts to relatives, let me say this first. Almost 95% of all Chapter 7 cases are "no asset" cases and this never even comes into play. In the few cases that it does, you will need to work with your attorney on the best course of action. This could be delaying your filing, or taking your chances.