Preferential Payments - Is this going to be a problem?

[DirkDiggler]

We have a $1000 credit line attached to our checking account that we have been using regularly but pay it off quite often when my wife's paycheck is direct deposited to our account. Our attorney is saying that due to it being used and paid off so frequently in the past 3 months, it will be seen as preferential payments. What effect will that have on our Ch. 7 and if they do take that $ from our credit union, will that have any affect on our ability to keep a banking relationship with them? Thanks

[JessMN]

All good questions - all I can say is that my trustee never even brought up my "direct deposit advance" account with my bank - I didn't owe the bank anything at the time of filing, but had used it a lot

[DirkDiggler]

Sorry to bump my old thread, but I've been wondering this....my credit union froze our account, but because we are current on the car loan and overdraft line, they agreed to unfreeze our account provided we keep current on the loans. Is the trustee going to take the $$ from the credit union? Does him taking the $$ from the credit union make our case an asset case? Sorry, just a little confused as to how this is going to work

[justbroke]

This is a question that only your attorney and/or the Trustee can resolve. The Trustee may not even care. It is true that it is technically a preference if you've paid more than about $600 in the last 90 days before filing.

The Trustee would go after the credit union (CU) for the preference. However, you could intervene and pay the preference back to the Trustee at a "discount". What that discount would be is based on how much time/effort the Trustee would spend on a preference action (and/or suit) to claw back the money from the CU. I can't give any advice on this, but sometimes offering as little as 40% of the preference amount will satisfy the Trustee. If we're talking less than $2,000 overall... the Trustee may not even be bothered anyhow.

To answer the "asset case" question... yes. If the Trustee finds it to be a preference and wants to claw back the money, then you are indeed an asset case. This doesn't affect your discharge. This would only affect how long it takes to administratively close your case.

[DirkDiggler]

I just totaled the payments and it equals $3604 and change

Also being that we have an auto loan with the credit union, if you include the car loan payment, that amount is now $4723, is it per INSTITUTION? Or per ACCOUNT?

Thanks for the clarification

[keepsmiling]

Car loan is secured and doesn't count as a preference.

[justbroke]

As written above, payments to secured creditors are not considered "preferences". A car loan is a secured debt; paying your car loan is not a preference.

[DirkDiggler]

Great thanks for the info....I'm guessing we'll know whether the trustee will be going after the funds at the 341 meeting in 2 weeks? Or will we know before then? Our attorney listed the payments on our paperwork....

[justbroke]

Great thanks for the info....I'm guessing we'll know whether the trustee will be going after the funds at the 341 meeting in 2 weeks? Or will we know before then? Our attorney listed the payments on our paperwork....

Probably at the 341 Meeting.