Preferential Payment To Family Member and Chapter 13?

[moe]

Hi--

I have a preferential payment to a family member now that I cannot avoid.

I have been told by one attorney that I have to wait 1 year.

I was told by another that I don't, but that I have to account for the $12,000 somehow. I guess it gets folded into my plan. He won't really answer detailed questions unless we hire him.

Does anyone know if bk is out of the question for a year if we declare Chapter 13 because of this payment?

Thanks!

[SMinGA]

My understanding is that at least the value of the pref. payment (+ any non-exempt assets) needs to go to unsecured. So if you have $12,000 in pref. payment, then at least $12,000 needs to go to your unsecured creditors in your plan.

That would be in addition to priority debts. Priority would be secured debt, mortgage arrears, taxes. I am not sure if it counts what goes to the trustee?

Example: if you had $10,000 in mortgage arrears and no other priority debts and a 10% trustee fee then you'd need to pay at least ($10,000 + $12,000) / .90 into your plan. Dividing by .90 accounts for the trustee fee. In this example, you'd need to pay at least about $24,445. So over 36 months that would be $679 or $408 over 60.

It becomes a real problem if there is not enough room in your budget to pay enough to cover priority, trustee fee, and preferential payments.

[HHM]

My understanding is that at least the value of the pref. payment (+ any non-exempt assets) needs to go to unsecured. So if you have $12,000 in pref. payment, then at least $12,000 needs to go to your unsecured creditors in your plan.

That would be in addition to priority debts. Priority would be secured debt, mortgage arrears, taxes. I am not sure if it counts what goes to the trustee?

Example: if you had $10,000 in mortgage arrears and no other priority debts and a 10% trustee fee then you'd need to pay at least ($10,000 + $12,000) / .90 into your plan. Dividing by .90 accounts for the trustee fee. In this example, you'd need to pay at least about $24,445. So over 36 months that would be $679 or $408 over 60.

It becomes a real problem if there is not enough room in your budget to pay enough to cover priority, trustee fee, and preferential payments.

Perfect analysis.

[moe]

Thanks to both of you.

That was what I suspected based on my 15 minute phone consult with the lawyer. He didn't want to go into details.

So I can declare Chapter 13 at any point. Now I have a second question, which you might not know the answer to.

The payment is to my father. Will I have to prove it was the payment of a debt and not a transfer of assets? Because I cannot have my father know that I am declaring bankruptcy.

I could sort of prove it somehow because of a car purchase that I made. I think I can prove I purchased the car as a result of my car accident. My father paid for this and I am paying him back out of the damages I got from my head injury during the accident.

But I don't know if I have to get some kind of affidavit from my father? That will not be possible.