Used CC to send $ to a friend - possible ramifications of such?

[JJCA]

I used the bill pay feature of one of my CC's to send a friend lump sums of money (about $5,000 total in 3 or 4 payments last year, most recent Dec 2010). I imagine from what I have learned here this would be preferential treatment. (If I note it upfront, shouldn't be considered fraud, right? I did nothing wrong/illegal, except maybe how it will look/apply in BK)

I am wondering:
1) Would why I paid this money to this person matter?
2) Would it make a difference if I was paying back money loaned to me versus just giving them money 'just because' or to 'help them out'? Or if I sent them money that they gave back to me?
3) If this was an issue of any kind (preferential treatment for example) Is it possible I could just 'pay back' that amount of money to that CC company? Or is it more likely I could not file BK at all. Or is it likely an issue even?

NEVER, EVER occurred to me maybe do BK someday...So never occurred to me that HOW I used my CC, or what I charged etc. would ever matter! Now seems I have to look back and wonder about everything! UGH!! Since the last amount of money ($1,500) was to my friend in Dec 2010, waiting a year for that to 'drop off' could be really hard. I just stopped charging & paying CC this month. (Although, I have read it is only 3 months that matter, but then also read 6 months and one year..so guess better go with one year to be safe)

Just in pre-planning stages & looking over past charges & wondering how they will affect BK. Have not had much luck finding a good BK attorney to give me 'solid' info, and too soon to truly hire one..since I have yet to find one I TRUST and really don't know if I can file BK anyway! Seems I get the best info & insight from here...thought I would see if maybe someone could answer this question :-)

[mtngirl47]

The only CC purchase that my BK attorney questioned was one made about 3 weeks before filing. It was an emergency car repair--and was actually the straw that broke the camel's back! Mostly they look at payments you make for preferential...or cash advances on CC.

If you're in pre-planning---stop using your credit cards now, move your money to a credit union or bank where you don't owe any money. Start saving for your attorney and filing fees. Make appointments and go see at least 3 BK attorneys for their free consultations. Most will have you fill out a form with all your debts, assets, income, and expenses. They can take a look and let you know if you qualify for a 7 or 13. You can also do the means test (link in one of the stickys). Good luck with it all!

[discouraged]

Do talk to a lawyer about this. I also used my card for emergency car work and 3 months later, after talking to a financial counselor, talked to a lawyer about bk. He wasn't too happy with the $1000 I'd put on the card just 3 months prior to that. It turned out that I chose a different lawyer and it took me 8 months after I'd talked to the first one to be ready for bk. By that time the outlook on the card had dropped off the radar.

A lawyer will be able to tell you the time frame you have to worry about. Good luck to you.

[Peeps]

An attorney can provide insight into the timeframes of interest for Bankruptcy Trustees and the US Trustee in your area. They can still look beyond those timeframes if they choose to.

There are some drop-off dates that help define presumed abuse. Despite this, your credit cards do still have the opportunity to file adversary proceedings if they believe fraud was involved in the use of your cards; the timeframes they choose will be the ones that best support their case. But once they go past the dates of presumptive abuse they have to prove fraud was intentionally committed, which is not all that easy to do. The more time that passes between the transfers and your filing, the harder it is for them to prove fraud. As I understand it, many APs are settled to help avoid costly legal fees for everyone involved.

Anyway, it sounds like there may be some confusion around whether you're looking at what a trustee might do vs what your credit card companies might do. It might be why you can't seem to get straight answers. In all honesty, no one can really predict what they'll do. Just plan the best you can, know the risks, and make the best decision you can based on the info you have. Best of luck.

[helpmeout]

I would wait at least a year since the last "payment" to your friend before filing.

[AtlBkAtty]

Look at paragraph 10 of the Statement of Financial Affairs regarding the payments to your friend.

Also, the answers to all these questions depend on your judge and your trustee and whether they lean towards creditors or towards debtors. We had a bank try to go after our client here last month for a loan he had taken out 2 months prior to filing his case. He testified that every dime went to repairs on his vehicle and that the loan had been taken out prior to losing his job. The judge found that the loan had been taken out in good faith and that our client was able to discharge the debt upon completion of his ch. 13 case.

[chrisdfw]

It might make a difference why. If you sent them money with bill pay and they gave you the money, that would probably be considered just like a cash advance (I would presume you were trying to get around cash advance fees?) If you were paying them back money, if could be viewed like a preferential payment.

An attorney could advise you, but in general people worry about these things more than they ever really come up.