Preferential transfer ?

[Bandit]

While it made our case an asset case it really had no practical effect on us. We discharged on time and the rest was between the creditor and the trustee. The only reason we knew it was going on was due to following it on PACER.

As HMM sugested since we did the balance transfer so close to filing the creditor who we transfered the balance too was not happy. They did threaten to object, but the amount was not high enough to make it worth their time and they never followed through.

I understand what happened there. I am kind of confused as to how he turned borrwed money into an asset. (?)
Your example is what I was thinking about because he turned borrowed money into an asset, then the CC wanted to object to discharge at the same time.
The reason that happened the way it did, I am pretty sure was due to the time it happened & the time of filing.
If someone would do that for only about 3 or 4 hundred dollars then nothing would have ever happened because it was under the 600 for 90 days. If you had swiped the card instead of doing the 0%transfer then none of that would ever happened & it is the same exact amount.
Thank God I have some cards with 0% on purchases!

I have one thing like that where I took a cash advance to pay back my cousin for downpayment on the hospital, this will be going back 8 months to a year by the time I get there & have been paying on that advance, & I know they can go back that far. I am not worried about them going to him for the money however, because I can prove that the money went to the hospital & I am not hiding money through him. If I had it to do over again, I may have payed him back slower or better yet, had someone bring me my own credit card to give the hospital the downpayment.

I had no idea until now, you could even list a relative as a creditor, that would have been the other option. If trustee goes after my cousin for the 2K, then I will be owing him 2K again plus I have already payed back about 300 to that advance. This is the same area where preferential & objection can get screwy, that is if it is over 3,000 & between the 0-6 months. It is so stupid & twisted.

I am not going to lose sleep over this stuff, cross that bridge when I get there. These are areas where I don't really care if I have to pay some of it back as long as I don't get stuck double paying.

[JollyGG]

The reason that happened the way it did, I am pretty sure was due to the time it happened & the time of filing.

Yes. Keep in mind that this transfer was only one or two months before filing.

Once we realized we needed to file we filed very quickly because of other issues (related to how close we were to the median income). Had we not been in the perfect position to file at that time we would have been better off waiting a few months from that balance transfer. But we got lucky and really had no negative reprocussions due to our choice. However, we knew the possibility was there for problems, but we also knew that due to the amount of the balance transfer it probably wouldn't be an issue. Additionally, had we had to it was an amount we could have delt with being nondiscargable. I was actually surprised that the trustee bothered with it as It was only a couple of thousand dollars.

[B12]

Was discussing preferential payments with a friend. He lent both of his kids down payment money to buy a house with the stipulation that he be paid back if the kids sold the house.

About 14 months ago, one of the kids sold their house, paid him back the 20% down payment he gave her, and now that kid is declaring BK.

I was relaying my limited knowledge of preferential payments to him and he is worried that the trustee might come after him for the money that the kid gave him to pay him back.

Any thoughts?

[lrprn]

About 14 months ago, one of the kids sold their house, paid him back the 20% down payment he gave her, and now that kid is declaring BK.

The current bk law gives one of the definitions of a preferential payment as "made - (A) on or within 90 days before the date the petition was filed; or (B) if the creditor was an insider, on or within one year before the date the petition was filed" (my emphasis) - http://www.expertlaw.com/library/ban...e_defense.html

Since this exchange happened 14 months before filing, your friend will probably be ok.

However, I'm hoping that your friend's son filed with an experienced bk lawyer who knows how the local court and trustees will react to this situation and told him it will be ok.

[B12]

Friend is down here in FL, the daughter up in NJ, so I don't think he knows much about her BK case, but will relay the info to him.

Thanks

[BurgerKingVII]

One of my BK attorneys does trustee work, and he says that as a general rule, he won't go after a preferential transfer unless it's $5K or more.

As other posters have noted, this kind of thing can vary depending upon the trustee, the district, and/or whether the creditor was an insider.

[SUB]

A relative loaned me around $15k for some equipment. We signed a promissory note. A Attorney informed me the equipment can be sold by the trustee despite the contract.

If the equipment was reprocessed shortly before a BK because of non-payment, could it be construed as preferential transfer/payment?

[HHM]

We have had a slew of questions on PT, so let me just put this in the discussion.

Let's back up and talk about PT's in general. Many members on this board and debtor's in general are over-concerned about this issue. The usual PT issue: e.g. debtor pays creditor X, an unsecured creditor, but does not pay his other unsecured creditors within 90 days of filing BK. PT's need not be of much concern to debtors because they are NOT involved in PT's in anyway.

If the trustee thinks a PT has occurred, he will send a letter to the creditor requesting the money, if the creditor refuses, then the trustee sues the creditor (note, the debtor is not, and will not be involved, PT issues are solely between the creditor and trustee). ALSO, a creditor cannot come back and object to discharge of a debt based solely on the fact that the payment was ruled a PT, so there is usually no downside to the debtor for having done a PT. The PT in no way effects your overall BK. The problem for debtors and PT is usually personal, because the most frequent type of PT actions are against a debtor's friends or family. But from a strictly legal perspective, a PT action is of little concern to the debtor. About all a PT action does is change a no-asset case to an asset case.

[PoorGrammyinBK7]

HOME Equity

Keep in the back of your mind...Preferential Transfer is when the debtor uses an "asset" of the soon to be created BK estate to pay a creditor in preference over similarly situated creditors.

The scenario you suggest, if I am reading it correctly, is the typical "balance transfer" scenario. Using one credit card to pay of another. That scenario does not give rise to "preferential transfer" because the debtor did not use an ASSET of the estate.

As other's have pointed out, preferential transfer actions almost never involve the debtor.

Questions for HHM:

1.) Would a payment toward a 1st Mortgage (to get balance to down to 80% and avoid PMI - private mortgage insurance) be considered a preference or payment to insider if within less than 1 year of filing?

2.) Would payoffs of credit cards with a HELOC 2nd mtg (plus $4K in cash - used for legal, trip, car repairs, etc) be a preferential payment if made within 70 days of filing?

3.) How is Chapter 13 different - if at all - in how the trustee would view these?

4.) Any other problems with these payments? The only other major debt we have is a large judgment but we did NOT have it when these were made -were in a lawsuit, disputing the debt, but ran out of money.

5.) Any suggestions - except just "see a lawyer" We've done that - its not free here - or at least has not been for us but one time.

Still trying to decide between a 13 and a 7 - obviously would prefer to do a 7.

[AngelinaCat]

In our case, if the settlement offer that our Trustee's Examiner sent by letter to our attorney [who then sat on the @#%^*&* thing, for two weeks, before forwarding it to us the day of the deadline to respond] is not accepted, [We immediately responded by email, snail mail, and firing our attorney.]the Trustee has to right to contact the people we repaid, and demand the money back. If they don't respond, then the Trustee can sue them for the money.

See: http://www.bkforum.com/showthread.php?t=25506] for further details.

[HHM]

Questions for HHM:

1.) Would a payment of $7K toward a 1st Mortgage (to get balance to down to 80% and avoid PMI - private mortgage insurance) be considered a preference or payment to insider if within less than 1 year of filing?

2.) Would payoffs of 3 credit cards $15K, $6K and $5K with a HELOC 2nd mtg (plus $4K in cash - used for legal, trip, car repairs, etc) be a preferential payment if made within 70 days of filing?

3.) How is Chapter 13 different - of at all - in how the trustee would view these?

4.) Any other problems with these payments? The only other major debt we have is a judgment but we did not have it when these were made -were in a lawsuit, disputing the debt, but ran out of money to fight and they got it.

5.) Any suggestions - except just "see a lawyer" We've done that - its not free here - or at least has not been for us but one time.

Still trying to decide between a 13 and a 7 - obviously would prefer to do a 7.

1. Not to an insider, insiders are only friends, families, corporations you own or have interest in. A lot will depend on timing, I assuming you are talking about an "over payment" of your mortgage. I would say yes, if you over pay your mortgage significantly, that would be intentional dissipation of assets.

2. Don't even do that, DO NOT CHANGE unsecured debt into secured debt. Whether there will be a PT is whether other similarly situated creditors were disadvantaged.

3. PT's are less of an issue in 13's because the asset at issue in a 13 is your disposable income.

I guess my question to you, is why are you even filing BK? If you have no meaningful unsecured debt, and all you have outstanding is a judgment, BK seems a rather aggressive move for dealing with it when you won't get a benefit in any other part of your financial life.

[PoorGrammyinBK7]

I guess my question to you, is why are you even filing BK? If you have no meaningful unsecured debt, and all you have outstanding is a judgment, BK seems a rather aggressive move for dealing with it when you won't get a benefit in any other part of your financial life.

Unfortunately we already made the payments mentioned - certainly not with any bad intent, just paying off debts as we have all our lives. I hope we can still file BK.

Why? The judgment, almost $100K is almost half our total debt. The judgment creditor is well-funded, aggresive and, I think somewhat crazy. I don't know if he could get our life insurance and rob our children of that - if something happens to us - but he threatened it. And who knows, maybe he would make sure something DOES happen to us. He is evil. We just want to be done with him and have our life back and stop worrying ourselves sick over it. We are not rich and don't have a lot of debt, other than this huge one.