Planning Bankruptcy

[Lajazz947]

So,

I finished my means test and I went on the section on financial condition and noticed " insider " payments.

In March of 2008 I paid back my business partner a $40,000 debt that I owed him from money that our company paid to my brother for the rights to a project which my brother actually owed money to ME on. Confused yet?

Now I see the insider look-back is 12 months. When I paid him back the $40,000 I also paid creditors $15,000 so its not like I skipped everybody. I just wanted to pay him back.

I have stopped paying my already creditors and I will meet with my attorney next week to review but now I am thinking about waiting until April of next year to file in order to put some distance between me and my associate.

Problem is that I MIGHT, no guarantees, might have a huge bonus by then and then it wipes it all out.

I could conceivably pay everybody back then but then my credit is shot and I might have judgements against me depending on how quick the creditors move.

As I wrote in another post I am going into this armed with knowledge and ready to fight the trustee.

Questions:

I am in Southern California
Is this as big a deal as I am making it out to be?
Does anybody have experience with this type of issue?

Thanks, the more I learn the more I HATE credit.

[keepmine]

Yep, it's a big deal.

[JRScott]

As Keepmine says it will be a big deal. You most likely will need to file til next year. In your case you need competent legal advice though and I'd suggest seeing 3-4 local bankruptcy attorneys to see what they say, be sure to mention the payment you made, because they need all the information to advise you correctly.

[Lajazz947]

Thanks. I thought that waiting for next year would be better.

I have disclosed this on the questionnaire and he will give me his advice.

Do you have advice on whether I should stop paying all my creditors?

I am now cash only on everything.

[JRScott]

Only if you can afford to pay them, if you can't I would not pay the credit cards Cash only is a good policy

[FreshLikeADaisy]

Lajazz, keep in mind that if you made a payment prior to bk that is then determined to be "preferential" or "insider" by the trustee, it doesn't make any difference to your bk: the trustee sues the recipient of the payment to get it back as an asset. Assuming you had no other problems in your bk, the worst that would happen is that you'd receive your discharge on time but your case would remain open until the trustee was done with trying to recover that payment from your old business partner.

So the question isn't really about your own bk nearly so much as it is about whether you mind having the trustee go after your business partner for the $40k.

Also, if you stop paying on your unsecured debt now (credit cards, etc.) be absolutely sure you also stop using them. If you keep using them after you've stopped paying, that can be grounds for a successful creditor objection in your bk.

Good luck!!!

[Lajazz947]

Thanks, I have no credit card accounts open, live on cash alone and it feels good too!!!!!

I don't really want my business partner to go through all this hassle because of me. I obviously paid him before i had any intention of filing.

He was there for me when I needed the cash so I need to be mindful of that.

I'll see what my attorney says though. I have LOTS of issues to consider.

[PoorGrammyinBK7]

Preferential distribution?

[QUOTE=FreshLikeADaisy;172790]Lajazz, keep in mind that if you made a payment prior to bk that is then determined to be "preferential" or "insider" by the trustee, it doesn't make any difference to your bk: the trustee sues the recipient of the payment to get it back as an asset. Assuming you had no other problems in your bk, the worst that would happen is that you'd receive your discharge on time but your case would remain open until the trustee was done with trying to recover that payment from your old business partner.

So the question isn't really about your own bk nearly so much as it is about whether you mind having the trustee go after your business partner for the $40k. QUOTE]

Fresh, maybe you can answer this one:

Not planning to do BK and really trying to AVOID having to BK, plus because of credit card jacking up interest rate to double what they had been --- we, in late April decided to pay off 3 credit cards ($15K, $6.3K and $4.5K) with our HELOC at a bank. Yes, I know, in hindsight, it was stupid but we did not expect to have to file.

90 days will be up on July 29 and we may be able to stretch it out and not file till the first week of Aug. But there is a chance we may have to file before the 90 days is up.

Now, either way - whether it is automatic or whether the trustee just decides (after 90 days) that these are "preferential" and is able to go after the CC's to get the money back - Do you (or anyone else on here) know how they would distribute funds in case of something like this?

Would this be an action taken by the trustee or would it be the bank (or some other creditor) that would object?

Thanks for any insight you can shed on this!

PoorGrammy

[lrprn]

LaJazz, I moved your original post with its replies off the old Oct 07 thread you started it on to here in its own new thread.

It's against our forum rules to post new questions to threads that have been inactive more than a few months. In the future, when you have a question to ask, please start your own new thread - thanks!

[FreshLikeADaisy]

Granny, sorry for my late reply -- I haven't been on in a few days, sorry.

The deal with trustee action against the recipients of preferential or insider payments is this: they -- like anyone else -- go after the lowest hanging fruit. It would be very expensive and a long, drawn-out thing for a trustee to go after your big, well-lawyered credit card companies, so chances are good that even though they have the legal right to do so, they probably won't.

On the other hand, waiting at least 90 days from the latest transaction is a whole 'nother issue, separate from preferential/insider payments. From what you've said, if you do not wait AT LEAST 90 DAYS (and if at all possible, even longer) from the date of taking out that HELOC to pay off the credit cards, the issuer of the HELOC could easily lodge a successful creditor objection against your bk. This would mean that while the rest of your unsecured debts were discharged, that one HELOC (or the portion of it you borrowed on that day to pay off the credit cards) would not be and you would still have to pay it back after the rest of your bk is over with.

****If at all possible**** wait more than 90 days. Take steps to protect yourself against any possible judgement in the meantime, read up on garnishment, levies, seizures, etc and what you can do to avoid them, and wait it out. If you are sued, you can have the judgement vacated after your bk, but if your HELOC creditor wins an automatic objection because you couldn't wait at least 90 days from the date of that transaction, that's $15k plus fees and interest you'll still be liable for post-bk. Avoid it if at all possible.

Hope this helps. Good luck!!!

P.S. Read this excellent FAQ by HHM on creditor objections: http://www.bkforum.com/showthread.php?t=20075