341...omg...

[biggomez777]

/sarcasm
Did you know that if you have a co-signer on a student loan(Sallie Mae) that any payments on it are considered preferential to the co-signer? I sure as hell didn't.
/sarcasm.

Yep. The trustee refused to fully close(?) our case after the 341 because she considered our payments to Sallie Mae preferential to the co-signer(my father).
I'm almost, nearly, totally positive that this is total and complete BS. How in the HELL does that payment help my father? If that was the case, re-affirming a debt on a car or house with a co-signer would be preferential because they could just go after the co-signer first. You CAN'T re-affirm a student loan, because it DOESN'T go away. Note: I only stopped paying my loans when the stay when into place.

Side note: I love my lawyer. He's getting an x-mas card. "This is ridiculous. If she goes through with this, we're going to court. And I'm making this part of your part of the fees you already paid me, so it won't cost you any more". ($900 fees, $299 filing). I almost want to hug him.

Anyone ever run into this, heard of this, or even have an opinion on this? Any information on what would happen if this trustee does declare it pref? (court proceedings, how far back they would go to take payments, etc). I'm curious to get into the mind of this trustee.

[justbroke]

Trustees are strange beasts. Many of them are lawyers. Many of them like to litigate their "opinion" of the law. If you want to fight it, you can, but it costs money to litigate. They hope you'll just go away and concur. Luckily your lawyer is wicked cool and will fight on the current contingency! Very nice.

However, there is case law to support the Trustee.

http://74.125.45.104/search?q=cache:VWzNkXo-z-8J:www.************************/2007/03/01/the-fate-of-co-signed-or-guaranteed-debt-in-bankruptcy/+bankruptcy+preferential+payment+of+student+loan+co-signer&hl=en&ct=clnk&cd=4&gl=us

Do not be tempted to pay down or have your co-signer/guarantor pay down co-signed debt prior to filing bankruptcy, at least not before speaking with bankruptcy counsel. Payment of one creditor to the exclusion of others may be an improper preference and the payment can be reversed.

From The Bankruptcy Law Network

I'll only add that I wonder if you had paid down that loan recently? Did you pay it down, despite not paying OTHER creditors. Because you stopped paying other creditors and continued to pay down the Student Loan, I could see where the Trustee opines those payments were preferential, especially since they protected your relatives credit!

Hey, but I'm no lawyer.

Oh, and let me just add, that I've been doing serious research and have studied many cases. I would say that almost 50% of those cases, that went to "trial" are from Trustees!

[biggomez777]

While I stopped paying my CC's(no secured debt) I didn't raise my payments to the federal gov't or sallie mae at all. I actually lowered the payments to sallie mae(4 year interest only deferment) during this time to make sure I could get by. If I had raised my payments to Sallie Mae I could go there, but I owe them $30k, it's not going anywhere.

And I would think paying one creditor over another would fit if the creditors are in the same category. Thanks to that stupid law in 2005(not sure if SM fits into there) Sallie Mae and the Federal Gov't(who were exempt before) are in a whole diff class from my CC's. (All I had was CC and student loan debt)

[justbroke]

And I would think paying one creditor over another would fit if the creditors are in the same category. Thanks to that stupid law in 2005(not sure if SM fits into there) Sallie Mae and the Federal Gov't(who were exempt before) are in a whole diff class from my CC's. (All I had was CC and student loan debt)

They are only in a different class as far as dischargability (in the 2005 BAPCPA). Anything could be a preferential payment, including the IRS. The only class which is exempt from preferential treatment are secured creditors.

It has to do with how they would have been paid through the Bankruptcy Estate. So, you're right to mention that the IRS, Student Loans, and Support Agreements, are in a different class. However, I don't think the preferential avoidance rules disallows treating them as such. That will be your lawyer's argument, of course.

I'd personally like to know how this works out. Will be an interesting case. Is your case a Chapter 7? That may make a difference???

[biggomez777]

Yep, it's a no asset CH7. I THINK I paid them for about 3 months before the stay. It only took us ~2 weeks to go from "everything's fine" to "shit, BK time". Another 2 months to get it together, and a month(due to the lawyer moving) to get it filed.

[justbroke]

Yep, it's a no asset CH7. I THINK I paid them for about 3 months before the stay. It only took us ~2 weeks to go from "everything's fine" to "shit, BK time". Another 2 months to get it together, and a month(due to the lawyer moving) to get it filed.

Chapter 7... yeah... the Trustee is coming after the money. Especially because you're no asset, the Trustee doesn't make any money. Since they see what they believe is an "avoidable" transfer, they're going for it.

To me, it sounds like it's not that much money anyhow... but they may be doing a look back of one year. Who knows.

Again, this will be interesting to see how and what your lawyer does.

[momof5]

Did you pay your Father or the loan? If you paid your Father directly and then he paid the loan then that may be why this is happening.
If not....

My understanding was that they would go after who got the money. This really does sound unbelievable and goes against pretty much everything I have learned through this whole process. Glad you have an awesome attorney willing to fight this for you. My guess is you will come out the other end successful.

[biggomez777]

Show me the $$$$$

All payments went straight to Sallie Mae. Do not pass go, collect all the blood from the stone that you can. The only thing my dad did was sign on the dotted line so my % would go from ~12 to ~7. He's never made a payment, received a bill, or anything. I THINK he gets a yearly statement on how much is owed since he's on the loan, but it's just a yearly thing.

[momof5]

All payments went straight to Sallie Mae. Do not pass go, collect all the blood from the stone that you can. The only thing my dad did was sign on the dotted line so my % would go from ~12 to ~7. He's never made a payment, received a bill, or anything. I THINK he gets a yearly statement on how much is owed since he's on the loan, but it's just a yearly thing.

I think you have nothing to worry about. There is no BK judge who is going to order your Dad to pay back money he has NOT received. Unfortunately now that the Trustee has initiated this it will probably be a drawn out process. I have been reading alot of different cases lately and it seems every now and then a trustee will 'test' the system a little bit. Not sure if its to get noticed or because they really are desperate for a some extra cash. Either way the frivilious ones seem to be shot down pretty hard by the BK judges who are completely impartial and work for protecting and upholding BK laws.

[JRScott]

Dang just read this, seems unbelievable.

I think you're lawyer will prevail . Good Luck

[BROKENN]

I am soooo glad you have a good lawyer!

This is stupid, blood from a stone is correct!

Sorry!

[biggomez777]

Can the trustee come after the payments I've made to Sallie Mae? As in, take the money I've paid to Sallie Mae and spread it amongst the creditors? That's my other concern.

[justbroke]

Can the trustee come after the payments I've made to Sallie Mae? As in, take the money I've paid to Sallie Mae and spread it amongst the creditors? That's my other concern.

This may be what the Trustee is trying to do... to distribute it to others. However, having read back everything, this may not be doable. The Student Loan is not dischargeable but is not the highest priority debt.

The Trustee could say that there are other secured creditors which need to be paid before the next "priority" is done. The priorities are usually in the order of Trustee, then your Lawyer, then Priority Tax Debts, then Secured Creditors, then the unsecured creditors.

From what I know, the Trustee can't distribute the money (if they in fact avoided the "transfer" of the payments to the Student Debt) to the general unsecured creditor pool (usually the credit cards). This is because education debt has higher priority.

Will be interesting to hear what the Trustee is really trying to do.

[biggomez777]

Ok, yea, I don't owe my lawyer anything, I owe Federal Gov't(stu loans), Sallie Mae, various medical debts, and various CC's. No secured, no taxes.

[biggomez777]

Just got off the phone with my lawyer, and this gets more interesting(to me).

If the Trustee decides to go the route she said she would during the 341, and she wins, they take money from my father that he never received.

Not quite sure how that works...I figured they'd take the money from Sallie Mae, as that's where the money went, and absolutely no $$ went to/through/anywhere near my father.