Preferential payment - family

[ssmdem]

In addition to our credit card bills and two upside down mortgages, we also own my mother $40K and my father-in-law $6500. They're getting paid back - one or the other - but do we list them when we're filing?

And on that note, in December we did an $18K loan from our 401K - I know, stupid! -- but we did. With that withdrawal, we paid $6K on a credit card, $500 on another credit, paid both mortgages that month, and gave my mom $1100 and father in law $200. Will these be seen as preferential payments since we doled out money towards all our bills that month? How are the family payments anymore preferential than if I had paid it all on just one credit card?

I have paid neither parent anymore money since then, but have been paying all other bills since then -- is this going to cause us any problems?

I'm praying that we can file Chap 7 and not have to do a Chap 13, but if we are forced into one, will family members get a portion of the payments distributed each month? And how do we show proof that this money was actually borrowed from them? Certainly they aren't going to just take our word for it. The $40K has been done in increments over the past 10 years, although most within the last 5 years.

[ssmdem]

You know - I just remembered something. The majority of the $40K (about $30K) was done as a home equity loan that my parents took out on their house. I was making the payments until my dad decided he didn't like their home being mortgaged, so he paid it off with money out of their savings. So, I'm guessing there is no paper trail for most of it that links me to it. ??? Well -- I'm guessing I should show a deposit into my account though if we can get statements from that far back. They also gave us a car a few months ago that was listed as a gift - although we told them we would pay them the $2000 that the dealership would have given them as trade in, so again, I'm guessing no paper trail. UGH!! We MAY can document about $10K - don't even know, I've had this loan going on for so long - can't even remember really when it started. Mom and I just kinda keep up with it on a spreadsheet - I pay her some when I can, pay her cell phone for her on our family plan, that kind of stuff. I know they really don't care if I pay it off or not, but I want to just to know that I did. We fully intended on paying them back when we sold our rental property three years ago before the housing market fell, and that just ruined that opportunity. I guess I'll just mention it to the attorney and see what he thinks is the best way to handle it.

[mtngirl47]

Hi--I'm sure somebody who knows the answers will chime in soon...but you probably should not mention these family loans to your lawyer--because then they will be included in the bk. I had a similar situation...I searched this forum for "family loan" and then read everything that has been posted. You may find that you have to plan to file your bk so that those payments are beyond the look-back period.

We're in a 13 and we have just decided to make small weekly payments to our family member -- via money order. We always wanted to pay big chunks but the income isn't there right now.

[AngelinaCatHub]

A fast answer to a quickly read post:

Since you have paid others and are still, this could be explained. Have parents give an affidavit as to the loan and the payments. That is simple.

Don't pay them any more at this time. After bk then you can pay them. Yes you must list them on your paper work for sure.

Got to go now, sorry. 'Hub

[NowImDownInIt]

Ditto what 'Hub said.. Never a good idea to leave something like that out and since you paid other things too it shouldn't be considered preferential.

[StartingOver08]

It is considered an insider payment. Family members are insiders. The lookback period is one year.

Look up insider payments in the search feature here and you will see plenty of posts where the Trustee goes after the $$$