Could someone explain preferential treatment to me?

[NewPage]

I have a number of creditors -- currently I am behind on one Chase card, Discover, and my Amex card. Probably this month I will not be paying my First National Bank. I have another Chase, a B of A, an Old Navy, and Bill Me Later that I am current on. I plan to stay current on those for the foreseeable future, the B of A largely b/c I/we have bank accounts with them. So until we can get that taken care of, I think I need to keep paying.

Am I guilty of "preferential treatment" by paying those creditors and not the other two?

Large Chase -- Missed March's payment, first one I have ever missed
AMEX -- Ditto above
Discover -- Ditto
1st National -- Will probably miss April, first one I will have missed
Small Chase -- Current ($20 minimum *I think*)
Bill Me Later -- Current ($10 minimum)
Old Navy -- Current ($12 minimum)
B of A -- Current ($85 minimum)

My husband suggests making token payments of $10 to each card at this time, so that they "know [you're] alive and haven't cut & run". Until we can get the bank account situation resolved, either by removing my name or having my husband open new accounts in his name only, I must keep current on B of A.

We are waiting to have me file BK until after the baby is born in 3.5 weeks. When the medical bills not covered by insurance come rolling in, then we will go ahead with the whole lawyer & file thing.

Any advice? I am not sure what to do. Can I reaffirm with Old Navy & Bill Me Later when I file? Is something like that allowed?

Thank you for any advice, etc!

[justbroke]

A preference needs to both be within the 90 days before filing, and for more than $600 to be an "avoidable" preference. Paying $20 here and there in the 3 months preceding the filing, is not a preference.

I would not even make "token" payments if you are filing. You're just wasting your money. Even if you did make an avoidable preference, it doesn't affect you personally! It would only affect the creditor who received the payment. The Trustee can't recover the preference from you, but actually sues the creditor to get the money back and divide it amongst all creditors that file a claim.

I would not reaffirm any unsecured credit claim. It makes no sense. Besides they'd close your account anyhow and probably won't extend new credit anyway.

[StartingOver08]

As stated above, token payments don't help you at all. The creditor will still call you.

As to making payments while you have open bank accounts with BOA, that is a good idea. The best idea is to close your current bank accounts and move them to a neutral bank where you have no credit accounts. Don't risk your deposit accounts.

As to reaffirming unsecured debt - don't do it. Look at filing BK as a "line in the sand" as of the filing date. Any account that you have with a balance will be listed on the petition. Some of those creditors "blacklist" after you file (AMEX is notorius for this). Some don't. Some accounts you will be able to go back to later and have new accounts after you are discharged, if you so choose. Don't mess up your fresh start by reaffirming debt, especially unsecured debt. It is said over and over in this forum, this is a business decision. Make sure you make the most of it.

[NewPage]

Thanks to both of you. Shortly after I posted I got a better understanding of preferential treatment from another section of the board - I appreciate both of you clarifying even more!

[SMinGA]

The bigger issue is if you have paid family & friends in the past 1-2 years. If you have paid a single unsecured creditor $600 or more in the 3 months prior to filing, or family/friends for a longer look back period, the trustee can have the creditor (or family member/friend) pay that money to the court to be divided among unsecured creditors.

The amounts you mentioned won't be an issue. If they were larger, you wouldn't really have an issue except that it could make your case an 'asset' case. It would be between the trustee & creditors though.

It hits closer to home when its family & friends, because most people filing BK don't want to draw their family & friends into their bankruptcy case.