Repayment of personal loan prior to filing

[ccsjoe]

Bit of a pickle here. I am meeting with my attorney this Friday to pay retainer, etc. I don't currently have retainer money without sacrificing a couple utility bills. My boss (very small business, boss specializes in financial planning so he's actually guiding me through this) has offered to lend me the $500 to retain the attorney. He would issue me a business check made out to me, I would issue him a personal check made out to the business dated a couple weeks out to repay the $500, so sort of a payday loan but with no interest. How would that be viewed from a CH7 trustee standpoint?

I also have the option of taking his check, going to his bank and cashing it, then repaying him in cash which I can withdraw from my account over a two-week period so there is not a sizeable withdrawal in one chunk.

Thank you

[jenra27]

I would go with second option as first would look like preferential payment or insider payment before filing. You must be very careful about checks being repaid to someone before filing as they look at that as preferential payment to a creditor. In this case, your boss (the creditor) is lending you money, and you are choosing to preferentially pay him back first.

[OHBOY]

You SHOULD be able to retain an attorney for less than $500.......that's my opinion.... In FL the standard retainer is $ 100.

Since the whole 'shebang' you described above is under $ 600 it should not matter, however....... I would certainly take the latter option..go to his bank.

[ccsjoe]

That's what I thought Jenra, thanks. I thought maybe since I was paying the business, but it would still look preferential. And while on the subject of preferential, since I am CH7'ing my cc's, yet keeping and reaffirming my car loan, I will continue to make my regularly scheduled car payments. Would that be viewed as preferential since we're talking about unsecured vs. secured debt?

[ccsjoe]

OHBOY, in CA near SF, a typical straightforward CH7 case runs 2.4-3.5K depending on the attorney. 200-600 retainers are not unusual here. This one is highly rated and cutting me a great deal in handling everything for 1.6K total including the reaff with Ford. On the even more plus side, he is well known to the Trustees where we'll file.

[ccsjoe]

Post-thought. You know, I almost feel like I'm committing a crime or something by having to hide what should be legitimately explainable...I know I need to do it, but sheesh, talk about cloak and dagger.

[jenra27]

Hi CCSJOE, I'm not quite sure about your car. If that is secured or unsecured. It may be secured. This sounds horrible, but when I filed my first bankruptcy when I lived in California, I was able to keep my car and get rid of my payments. I'm not sure if it had to do with the remainder of the payments or what. There wasn't that much more left to pay on the car, but the lawyer said to include it. You may want to research what is exempt in Ca. some more online or talk to an attorney so you know for sure. I can't tell you how many times my pre-BK planes have changed in the last week due to my researching efforts. The more i research and learn, the more prepared I am! Good Luck to you!

[ccsjoe]

Car is secured. We will be keeping car and reaff with FMC. FMC will repo if no reaff, no ifs ands or buts there. Loan outstanding on car is 29K, car is a 2010 model purchased in Feb so no chance of ride & pay. I will be retaining & meeting our attorney tomorrow. But thank you for your input, I know everything changes very quickly...as soon as you figure one piece out, there's another new wrinkle...lol

[jenra27]

Believe you me I know....Good Luck to you...I mean that!!!!

[tcreegan]

secured payment not preferential

Hi cssjoe,

I have read on the forum that payments on secured debt is not preferential.
Many people keep the car or house current, don't seem to have any problems.

Tom in Colo

[wsy]

Car is secured. We will be keeping car and reaff with FMC. FMC will repo if no reaff, no ifs ands or buts there. Loan outstanding on car is 29K, car is a 2010 model purchased in Feb so no chance of ride & pay. I will be retaining & meeting our attorney tomorrow. But thank you for your input, I know everything changes very quickly...as soon as you figure one piece out, there's another new wrinkle...lol

In California if you are current on the car loan and continued to be current the bank cannot take any course of action. It is not preferential payments.