Is this an insider payment...

[topekajack]

I was self-employed and was desperately waiting for a payment from a client. I didn't know when it was coming. I borrowed $10,000 from family to pay bills for the next 2 months. The DAY AFTER I borrowed the money I got paid and promptly paid my family back. The check cleared a few days later. Is this considered an insider payment? Also, this happened in late August. If I file in January is this going to be a problem? One attorney said that the trustee will go after it. Another said that it wouldn't be a problem. Is it just up to the trustees discretion?

[forgotten]

The short term loan agreement you wrote (hint) that specified the loan was due and payable within 7 days. You paid the loan because it was currently due in full. This presents a valid argument for normal course of business and not a preferential payment.

You may or may not get a fight from the trustee on it.

[HHM]

Normal course of business sounds like a weak defense here, unless you take out these short term float loans all the time, prior to filing, it probably would not be a good defense.

Unfortunately, that transaction probably, very much is, an insider payment. The only facts that need to be established are
1. payment was to a creditor (you borrowed money)
2. it was an antecedent debt (even though it was only 7 days, it was still a prior debt).
3. made while the debtor was insolvent (this is the key element)
4. made between 90 days to 1 year before filing the case to an "insider" (family member is an insider).
5. the creditor received more then they would have had you filed chapter 7 at the time.

[frogger]

HHM is right. You probably are going to need to wait until at least a year from the check clearing before filing.

Good luck.

[StartingOver08]

I don't think the 'agreement' with a family member will work anyway. The Trustee's are onto that and they review any payment within a year to a family member, friend or business partner as an insider payment. If you want to file before the year, make sure you have a plan to repay the Trustee the $10k you paid your family last Aug which would make you an asset case.

[AngelinaCatHub]

I don't think the 'agreement' with a family member will work anyway. The Trustee's are onto that and they review any payment within a year to a family member, friend or business partner as an insider payment. If you want to file before the year, make sure you have a plan to repay the Trustee the $10k you paid your family last Aug which would make you an asset case.

Yes. It happened to me. I had to pay 5K to my Trustee. It is the LETTER OF THE LAW. In practice, they cannot slide on this fact. Even if it were not a relative or friend, it would be a "preferential" payment. In this case it is both preferential and insider. 'Hub


Edit: P.S. ANY after the fact agreement is fraud. That would amplify the Op's problems ten fold.

[HHM]

The key defense to these types of actions is "insolvency". If you can show you were not technically insolvent at the time, then it is not a preference.

[topekajack]

Unfortunately, I cannot wait a year to file. I must file within the next couple of months. I have no way to pay pack the $10k... I have zero assets. At the time I was not insolvent... I just needed cash to stay current on mortgage, cars and so on. I didn't have to take the loan. Sounds like I'm screwed!

[frogger]

I must file within the next couple of months.

Calm down and slow down. "Must" is a mighty big word. Perhaps before making up your mind that you "must", you should talk with a competent bk attorney that could give you some good advice.

$10k would be a great incentive for me to look at options to delay filing. How about you?

[DeadManCrawling]

I also thought I MUST FILE within a couple months.

That was three years ago, almost to the month and day.

Three years later, we are just filed. See Signature line.

You would be surprised at how much time you MAY have. Even impending suits don't necessarily mean you MUST file.

Our first default judgment came 2 and a half years ago. Only 60 days or so ago did it get serious enough for us to file.

Good luck

[Skipper]

I also thought I MUST FILE within a couple months.

That was three years ago, almost to the month and day.

Three years later, we are just filed. See Signature line.

You would be surprised at how much time you MAY have. Even impending suits don't necessarily mean you MUST file.

Our first default judgment came 2 and a half years ago. Only 60 days or so ago did it get serious enough for us to file.

Good luck

Hi DMC,

I hope you don't mind, but what occurred following you default judgment?

As I have posted elsewhere, I received a summons from Zwicker (AMEX) which would have required a response this week. Instead, I had the attorney send a letter, informing them of my intent to file.

I may be following in your shoes a little bit, and I would be interested in what to expect.

TIA,

Skipper

[AngelinaCatHub]

Hi DMC,

I hope you don't mind, but what occurred following you default judgment?

As I have posted elsewhere, I received a summons from Zwicker (AMEX) which would have required a response this week. Instead, I had the attorney send a letter, informing them of my intent to file.

I may be following in your shoes a little bit, and I would be interested in what to expect.

TIA,

Skipper

Skipper, in all due respect, if this is not a valid response to a hearing, they will still get a default Judgment. A letter does not get it. I pray I am wrong. 'Hub BTW Merry Christmas

[Skipper]

Skipper, in all due respect, if this is not a valid response to a hearing, they will still get a default Judgment. A letter does not get it. I pray I am wrong. 'Hub BTW Merry Christmas

Merry Christmas to you also!

I expect the default Judgment. I am just curious about the time-line of potential events which may follow.

Like I said earlier, I am hoping to hold off on filing until I finalize the mortgage modification I am working on. This should occur around early February. Worst case (I hope) would be that I am forced to file prior to my modification becoming permanent, but if it happens, I will deal with it.

Take care and thanks again for all of the helpful advice that you have provided to all of us!

Skipper

[DeadManCrawling]

We actually had TWO default judgments. CapOne and GEMB. They both occurred about the same time, around 2 and a half years ago.

The following time-period was very interesting. Even though they had a default judgment, and KNEW our banking information, they did NOT access the accounts or enforce the judgments. I cannot say why. In hindsight, we made many mistakes, and this one was a doozy. They COULD have taken money any time they wanted. Right? I am not sure if our state, Florida, has a UCC provision against collections of this sort. That is about the best guess I could come up with.

Another possibility is the Florida head of household wage-earner exemption.

Check state laws where you are for similar quirks. These may be what saved our bacon.

In any case, CapOne sent occasional letters after the DJ. Never did hear another word from GEMB, even to this day. Just got their judgment and quietly disappeared.

CapOne waited a year and a half and went to court again, September or so of 2009. They asked for a Debtor's Exam. The motion was granted and they sent a long questionairre, demanding bank account and asset information. At this point, they ALREADY had our bank accounts, of course, but must have been forced to ask again. Or maybe they were just making a tremendous mistake. Of course, the attorney they hired was paid by the HOUR, so it benefitted the attorney to keep the filings coming.

The Debtor Exam was scheduled for Dec 14 2009, but we filed ahead of that, and here we are.

I sure would not plan your future based on this ramshackle derailing train. In our case, there were enough mistakes on both sides for a Monty Python movie. But who knows, you may have some luck, too.

[marie]

good luck tomorrow DMC !