Preferential Payments to Credit Cards

[BrokeInCali]

My debt in my BK consists of 3 credit cards. That's it.. Nothing more.

In the last 90 days I have paid approximately $3,500 to these credit cards.

When I filed (Yeah ~ I officially filed the other day!) my attorney said that the trustee may look at these as preferential payments and get them back to distribute to my creditors.

After I left his office I went huh?? I understand about preferential payments, but why would the trustee take money back from the same creditors he would then have to distribute the money to?

The only creditors I have are the creditors I paid. It seems like it would be a waste of the trustees time to do this.

Any insight?

[sh9730]

I would agree...but then he wouldnt get his commission! LOL....but he still might not do it.

But, of course we dont know any of the rest of your situation (from this post at least), but my worry might be more that if you could afford 3500.00 in payments to your creditors....maybe you have too much DMI to qualify for CH7?!

But, again, Im sure your attorney did a means test and we dont have all the facts here.....

[jacko]

If you knew you were going to file, why would you send $3500 to your creditors. Sorry but that is dumb. That money should of been deposited into a IRA.

My debt in my BK consists of 3 credit cards. That's it.. Nothing more.

In the last 90 days I have paid approximately $3,500 to these credit cards.

When I filed (Yeah ~ I officially filed the other day!) my attorney said that the trustee may look at these as preferential payments and get them back to distribute to my creditors.

After I left his office I went huh?? I understand about preferential payments, but why would the trustee take money back from the same creditors he would then have to distribute the money to?

The only creditors I have are the creditors I paid. It seems like it would be a waste of the trustees time to do this.

Any insight?

[LadyInTheRed]

After I left his office I went huh?? I understand about preferential payments, but why would the trustee take money back from the same creditors he would then have to distribute the money to?

The only creditors I have are the creditors I paid. It seems like it would be a waste of the trustees time to do this.

Any insight?

You may not have paid the creditors in proportion to the total debt owed to them. If the trustee takes the money, he would redistribute it so that each creditor gets the same percentage of the amount you owe them.

[BrokeInCali]

You may not have paid the creditors in proportion to the total debt owed to them. If the trustee takes the money, he would redistribute it so that each creditor gets the same percentage of the amount you owe them.

Okay, that makes sense on why a trustee would do that.

If you knew you were going to file, why would you send $3500 to your creditors. Sorry but that is dumb. That money should of been deposited into a IRA.

Not everyone knows they are going to file in advance. Some people realize they have to file and then just do so right away.

[fiona]

Okay, that makes sense on why a trustee would do that.



Not everyone knows they are going to file in advance. Some people realize they have to file and then just do so right away.

I agree. I was forced into it myself. Sometimes are judgments, etc. and one doesn't have the luxury of pre-planning. In terms of the MI requrement, I know people whow made twice as much I did, but still qualified for Ch 7. That is what why you hire an attorney.

[debee]

And some people prefer to pay right up to until they file so they don't have anything on their credit report except the IIB. They say their credit rebounds quicker.

[jacko]

You mean their debt rebounds quicker.

And some people prefer to pay right up to until they file so they don't have anything on their credit report except the IIB. They say their credit rebounds quicker.

[debee]

You mean their debt rebounds quicker.

Not necessarily. Some people lack restraint and will get back into debt post-bk, but not everyone. There are debtors whose credit card debts are small and incidental, but whose medical debt or housing debt is huge.

For people who want to qualify to buy a house two years out, it can make sense to continue their payments right up until filing IF it mitigates the credit score tank and helps them accomplish their goals.

After all, the goal of bankruptcy isn't self-destruction, but self-preservation. What form that takes will vary according to the needs and circumstance of the debtor.