If Preferential Treatment Found - What Happens?

[ApresMoi]

I have been paying several hundred per month to storage, and keeping up with the payments. However, they are getting harder and harder to make, and I am not sure I am going to be able to keep up.

When looking into BK, I asked one of the attorneys I was consulting with about whether storage payments are the same as 'unsecured creditor', and was told they are more like a 'service agreement'. My concern was whether paying the storage and not my creditors (in the 90 days prior to my filing..in an amount over $600) would be seen as preferential. I was left with the impression that as long as I was current on payments, this would not be an issue, but if I defaulted on the payments, this 'might' be seen as preferential.

Anyone care to comment? If I can't make the payment next month (which would be shortly after I filed) what happens then? i would rather not default, but I may not have a choice.

[AngelinaCatHub]

What is in storage that is so valuable that you throw money away on it? Take it out and store it in your house or attic or under the bed. If you stop paying storage, by and by the storage company will auction it off. My god-daughter goes to storage auctions all the time and gets many personal and good things, puts it on eBay.

Once that happens you loose the storage money and the stuff.

It is not a preferential payment until it becomes a debt. One missed payment and it is a debt. Now it is a rental service as your lawyer said. Get the stuff out and save your money. 'Hub

Edit: Oh one other thing, anything in there will become part of your bk estate. Best to sell it now and use the money for living expense than to lose it either way.

[ApresMoi]

deleted (duplicate).

[ApresMoi]

There's nothing that can be done about moving right now. Movers are expensive (goods have to be transported long distance). Current living space has no room for the goods in any event. I am in a holding pattern awaiting the filing of the BK and re-employment (at which time I hope to be able to resolve storage).

So, if a payment is missed it becomes a debt, got that. Let's say the Court decides that was in fact, a 'preferential treatment'. What happens then? Does this jeopardize my BK? I am very concerned. I can't foresee the future...as it stands, I might not be able to pay next month.

What is in storage that is so valuable that you throw money away on it? Take it out and store it in your house or attic or under the bed. If you stop paying storage, by and by the storage company will auction it off. My god-daughter goes to storage auctions all the time and gets many personal and good things, puts it on eBay.

Once that happens you loose the storage money and the stuff.

It is not a preferential payment until it becomes a debt. One missed payment and it is a debt. Now it is a rental service as your lawyer said. Get the stuff out and save your money. 'Hub

Edit: Oh one other thing, anything in there will become part of your bk estate. Best to sell it now and use the money for living expense than to lose it either way.

[AngelinaCatHub]

Once it is a debt, unless you pay all others equally, in other words at least their minimum payments, and you choose one debt over another, then it becomes a preferential payment or you are favoring one creditor over another. This is not allowed and the Court determines that what you paid is part of your estate and can go after that payment and recover it to the estate. Then THEY will make you an asset case, that will extend your bk considerably. Once everyone now is noticed that you are an asset case, the Trustee will eventually offer you to purchase your asset back (usually at a fairly reduced rate) and may even give you terms, (ours was 12 equal payments extending our discharge a year) or he will pay secured debt or priority debt first (IRS example) and divide what is left to the other creditors if anything.

Here is a horror story: My wife stored some very valuable family antiques for three years or more. The total she paid in that time was $1200. We had no place for such huge items and we got bids from dealers. Best we could get was $1200. All that trouble for nothing. 'Hub

[lrprn]

So, if a payment is missed it becomes a debt, got that.

Personally I don't think this situation is like paying more than $600 in the 90 days before filing to one unsecured creditor over another - that's what sets up a preferential payment. It's more like you've contracted for a service that you now can't pay for.

If you have your original storage agreement, take a close look at it. My guess (and this is just a guess) that your stuff inside the storage locker is forfeit for sale pretty quickly if you miss payments. The storage place gets repaid for the missed payments by selling your stuff.

Let's say the Court decides that was in fact, a 'preferential treatment'. What happens then? Does this jeopardize my BK?

Preferential payments (and again, I don't think this situation fits in the preferential payment category), doesn't affect you or your bk at all. The storage company would be forced to turn over the contents of the locker or the cash proceeds if the contents have been sold to your trustee. Your trustee divides whatever cash results evenly between all your creditors. Your case continues on. Nothing changes for you at all.

I am very concerned. I can't foresee the future...as it stands, I might not be able to pay next month.

You didn't share what's in the locker and what the value of the items stored there might be. Do you still have friends or family in the storage locker area who might be able to help you out by cleaning out the locker and storing the items elsewhere until you can retrieve them?

If not, then unfortunately this is one of those very sad situations where you may have to accept losing things you value in order to achieve your long-term goals of getting out of debt and establishing financial stability. As difficult as it might be, you need to seriously consider thinking about whether it's best to emotionally move on from what's there in the storage locker and keep looking forward instead.

[ApresMoi]

If I file for BK before they can get a lien and sell things, wouldn't that stop them from selling things?. The court owns my things at the time I file, so they would 'own' the goods in storage at that point. Why would the court not discharge the debt to storage the same way they are discharge cc debt? The storage place is listed on my BK petition. I was told we had to have it on there (even though I was current on payments when I was filling out that paperwork) because for purposes of BK, it is an 'executory' contract. In BK, executory contracts have a different definition. If there an ongoing obligation between two parties, it's an executory contract. And if it's executory, it has to be listed on the petition. So why could not that 'debt' be discharged. And my assets protected from seizure and sale?

Personally I don't think this situation is like paying more than $600 in the 90 days before filing to one unsecured creditor over another - that's what sets up a preferential payment. It's more like you've contracted for a service that you now can't pay for.

If you have your original storage agreement, take a close look at it. My guess (and this is just a guess) that your stuff inside the storage locker is forfeit for sale pretty quickly if you miss payments. The storage place gets repaid for the missed payments by selling your stuff.



Preferential payments (and again, I don't think this situation fits in the preferential payment category), doesn't affect you or your bk at all. The storage company would be forced to turn over the contents of the locker or the cash proceeds if the contents have been sold to your trustee. Your trustee divides whatever cash results evenly between all your creditors. Your case continues on. Nothing changes for you at all.

You didn't share what's in the locker and what the value of the items stored there might be. Do you still have friends or family in the storage locker area who might be able to help you out by cleaning out the locker and storing the items elsewhere until you can retrieve them?

If not, then unfortunately this is one of those very sad situations where you may have to accept losing things you value in order to achieve your long-term goals of getting out of debt and establishing financial stability. As difficult as it might be, you need to seriously consider thinking about whether it's best to emotionally move on from what's there in the storage locker and keep looking forward instead.

[keptdigging]

I think this gets overblown. Yes preferential payments can make you an asset case. But they're not some sort of crime or fraud and they don't affect your discharge. It's between the Trustee and the creditor. Now people get concerned when the creditor is an insider because no one wants mom to get sued by the TT.

Besides creating an asset, they don't "work", because the TT will claw them back, take his/her cut, and distribute equally. Assuming you being untruthful, the TT should "like" finding preferential payments to creditors. Assets are how they get paid.

But in my case I am absolutely, positively, paying preferentially on one debt. Its my most recent and a relatively large balance transfer sin and I want to weaken the banks case to objecting to its discharegability as much as possible. (And it's only $150/month so a 3 month lookback isn't going to cross the $600 threshold anyway.)

[I had a great link on this but unfortunately every way I try to type it in it is losing the web address when I save.]
=====
All that being said I don't see how paying storage fees is any different than paying the electric bill. And if we REALLY want to overthink (I have a habit of doing this) theoretically paying the storage fees is protecting the assets in your future bk estate for the benefit of your unsecured creditors!

[SMinGA]

It should not be 'preferential payments' because you're paying for an ongoing service, not an unsecured debt. You do have a potential problem though, that once you file you create a new financial future. Any bills that occur after filing cannot be discharged. If you include a storage bill in the bankruptcy (have an outstanding balance at time of filing) then the storage company could refuse to allow you to continue renting the space.

I would suggest either move your stuff out of storage BEFORE filing, or make sure you have no balance owed @ time of filing AND can keep paying after. Otherwise you could run into a problem. The automatic stay would prevent the storage company from selling your stuff, but I'm not sure the automatic stay gives you rights? I mean, would the storage company HAVE to allow you access to your storage unit after filing to get your stuff out? I don't know.

Storage is different from a utility bill in that storage is optional. Maintaining gas & electric service is not. And utilities are often monopolies, where you can't go to a competitor because you defaulted w/ one electric company. A utility company bill can be discharged, and the utility co. would need to start a new billing from the date of filing for service then on. They cannot deny you service, but they CAN require a hefty security deposit.

[ApresMoi]

I was able to pay storage before filing, which left me with next to nothing to live on. The storage goods are safe for now (and all exempted on the schedules). By some miracle, as soon as my bank account balance was depleted, I got a call about work, which will bring in enough to cover expenses (including storage payments) for a few months. In short: Yay!! As soon as I am discharged from the credit card debt, I intend to a) move and b) get my things out there!!

Personally I don't think this situation is like paying more than $600 in the 90 days before filing to one unsecured creditor over another - that's what sets up a preferential payment. It's more like you've contracted for a service that you now can't pay for.

If you have your original storage agreement, take a close look at it. My guess (and this is just a guess) that your stuff inside the storage locker is forfeit for sale pretty quickly if you miss payments. The storage place gets repaid for the missed payments by selling your stuff.



Preferential payments (and again, I don't think this situation fits in the preferential payment category), doesn't affect you or your bk at all. The storage company would be forced to turn over the contents of the locker or the cash proceeds if the contents have been sold to your trustee. Your trustee divides whatever cash results evenly between all your creditors. Your case continues on. Nothing changes for you at all.

You didn't share what's in the locker and what the value of the items stored there might be. Do you still have friends or family in the storage locker area who might be able to help you out by cleaning out the locker and storing the items elsewhere until you can retrieve them?

If not, then unfortunately this is one of those very sad situations where you may have to accept losing things you value in order to achieve your long-term goals of getting out of debt and establishing financial stability. As difficult as it might be, you need to seriously consider thinking about whether it's best to emotionally move on from what's there in the storage locker and keep looking forward instead.

[AngelinaCatHub]

Wow, good and meaty thread. Grats on your good fortune. Sure gave us all a bit of an education.

My observation is: Your stuff belongs to the estate. Once bk, the estate owns it. Next the bill still goes on for storage even if the storage cannot sell it off, but you would still owe it after filing. Then, only the Trustee could get into it as it probably would be locked down for non payment anyway. It would still be a preferential payment technically, but not to a point of care unless over $600 or so.

You have been blessed. Good luck to you and keep us informed. 'Hub

[ApresMoi]

'Hub -- I consulted with the attorney about this situation. Yes, I agree with your take on the situation, except for the point about preferential treatment. Though the payments to storage do exceed $600, I don't think the Trustee would care. As someone else said, storage payments are more like utility payments...I wasn't making payments to an unsecured creditor.

If the storage bill had remain unpaid at the time of filing, the debt would have become a secured debt, as I think you pointed out. At the time of filing, the contents become the property of the BK estate. And an automatic stay goes into effect. The Trustee, however, could decide to liquidate, but he/she would also have to settle up any pre- or post-petition fees with storage, or otherwise make arrangements to settle up with them, by, for example, using a portion of the proceeds of the sale to pay them off.

Let's say the Trustee decides (based on what I have listed and exempted re storage in the Schedules) that they are not motivated to liquidate. What storage can do is file for Motion for Relief from the automatic stay and sell the goods. Or, they can just sit back and wait for the automatic stay to terminate when my case is closed, at which point they could sell the goods. But that puts them in a bind, since waiting for the case to close could take months -- three months or more -- during which time they are getting zip in the way of rental income on that unit. If they did that I would not owe them anything, but I also would have lost all the goods. They would have taken my goods to satisfy the debt.

Because all my storage goods were listed and exempted on the Schedules, the Trustee would not have been motivated to seize and sell. I doubt whether storage would have hired an attorney to seek a Motion for Relief given the small sums of money involved, but who knows?.

Bottom line, the goods probably would have been protected by the automatic stay, and at the end I would have had the option of paying off what I owed storage pre and post filing to again gain access to my things.

Then again, storage might have had attorneys on staff just waiting to pounce with a Motion for Relief. I do not know...

It was a lot less complicated to just pay the bill before filing!

Thank you so much for your concern and support. I was amazed that I was able to figure something out to save things...and hope to be 'ok' going forward. Yes, blessed, at least for this round.

Wow, good and meaty thread. Grats on your good fortune. Sure gave us all a bit of an education.

My observation is: Your stuff belongs to the estate. Once bk, the estate owns it. Next the bill still goes on for storage even if the storage cannot sell it off, but you would still owe it after filing. Then, only the Trustee could get into it as it probably would be locked down for non payment anyway. It would still be a preferential payment technically, but not to a point of care unless over $600 or so.

You have been blessed. Good luck to you and keep us informed. 'Hub

[AngelinaCatHub]

I tend to agree on all counts. I too don't believe the company would attempt a lift of stay and incur the expenses as they have an asset in reality by possession. It takes about three months default, then the company has to make a good faith attempt to notify the owners before they can seize and auction.

I am delighted to hear good out comes. Now you can start practicing your "new start" while waiting for discharge. Where are you moving? Will you take off right away after the close? Do you have a job at your destination?

BTW, in our local paper yesterday, one of our local banks (not a chain) was seized by the FDIC and closed. This was Friday at 5:00. It had been an S & L turned bank. I believe all S & L's did after the '70's S & L problems. 80 years of service here. A Delaware holding company has taken over the assets. Saturday the drive throughs were allowed to be open only for that time, so I don't know what will be Monday morning. Of course 'Bammy is fixing our economy, I hear it every day on the Obama news networks. I am in FL and our County is 14% unemployment rate. My wife with a Masters degree cannot find work and is past two years of unemployment extensions.

Good luck to you, my friend. 'Hub

[ApresMoi]

No, not moving elsewhere, just hope to move to a place large enough to take my things out of storage (and end that money draining fiasco).

Am beyond irked that the community banks aren't worthy of rescue, while we were perfectly willing to pour billions into the 'too big to fail' banks. It was a lot of fun reading about the outrageous bonuses the 'too big to fail' bangsters were giving themselves with our taxpayer dollars.

I tend to agree on all counts. I too don't believe the company would attempt a lift of stay and incur the expenses as they have an asset in reality by possession. It takes about three months default, then the company has to make a good faith attempt to notify the owners before they can seize and auction.

I am delighted to hear good out comes. Now you can start practicing your "new start" while waiting for discharge. Where are you moving? Will you take off right away after the close? Do you have a job at your destination?

BTW, in our local paper yesterday, one of our local banks (not a chain) was seized by the FDIC and closed. This was Friday at 5:00. It had been an S & L turned bank. I believe all S & L's did after the '70's S & L problems. 80 years of service here. A Delaware holding company has taken over the assets. Saturday the drive throughs were allowed to be open only for that time, so I don't know what will be Monday morning. Of course 'Bammy is fixing our economy, I hear it every day on the Obama news networks. I am in FL and our County is 14% unemployment rate. My wife with a Masters degree cannot find work and is past two years of unemployment extensions.

Good luck to you, my friend. 'Hub