Preferential Payment of Creditor or Normal Course of Business ?

[bbnet]

My Bro in Law loaned me 45k , Feb 2010 , promissory note based on vacant land....Note was not officially Recorded(Deed of Trust) until later date, October 2010

SOLD this Vacant Land (Fair Market /Real Buyer via Realtor) $95k / and Promisory Note PAID IN FULL at Closing in Dec 2010

Need to file Chapter 7 in July 2011.......(or will wait if considered preferential at least 1 YEAR)

Preferential Payment....Relative payback? or Normal course of Biz?

[AngelinaCatHub]

HMMMMM this is a quandary. It has the look of normal business but the B in law muddles the fuddle. May I ask, at that timing, were you paying everything else on time? That would determine a lot.

At this time, more info needed or you should consult a lawyer for sure. You mentioned that you could wait a year. Time is always your friend in a bk. Distance is good.

Until you get cornered with suits, as far as what you have given, I would wait as long as possible. 'Hub

[bbnet]

Preferential Payment?

HMMMMM this is a quandary. It has the look of normal business but the B in law muddles the fuddle. May I ask, at that timing, were you paying everything else on time? That would determine a lot.

At this time, more info needed or you should consult a lawyer for sure. You mentioned that you could wait a year. Time is always your friend in a bk. Distance is good.

Until you get cornered with suits, as far as what you have given, I would wait as long as possible. 'Hub

other payments mixed bag ...Mortgage and Car payments OK CC falling behind and very lated on other loans....2 Lawsuits Now Filed ...Waiting for others to Roll in....

Waiting game but could end up with some judgment liens on home.....I am presuming that I will be able to Remove those after BK Approved?

Thanks BB

[AngelinaCatHub]

other payments mixed bag ...Mortgage and Car payments OK CC falling behind and very lated on other loans....2 Lawsuits Now Filed ...Waiting for others to Roll in....

Waiting game but could end up with some judgment liens on home.....I am presuming that I will be able to Remove those after BK Approved?

Thanks BB

No my friend. Do not wait but take your chance. Judgments are an evil thing and not so easy to dismiss in bk. In fact they can cause you much more trouble if you do not act sooner than later. Judge the time, go as far as you can, do NOT ignore a hearing and attempt to stall. But file before the hearing for sure. 'Hub

[HHM]

Probably not preferential. The issue will be why the delay in recording the deed. The "trustee" could unwind it if there was some sort of fraud, but unlikely. If there was fraud (and since we are dealing with real estate), timeline really doesn't matter, the trustee can go back 10 years. Get a "good" attorney (and yes, it will cost you) and get your BK filed.

[bbnet]

OK Guys...Thanks for replies....Sounds like I need to just "Roll the Dice" and move forward ...sounds like Judgments are Bad News

[despritfreya]

You absolutely have a preference problem.

The loan was taken out in 2/10. It was suppose to be secured but the security interest was not recorded (perfected) for 8 months. This means there was no contemporaneous exchange which runs afoul of 547(c)(1) and falls under the category of 547(e)(2)(B). You then sold the collateral and paid off your BIL in 12/10. Since, by the recording (perfection) of the security interest, you put a family member (by marriage) in a better position than any other unsecured creditor and then paid him, you need to wait the 1year preference period. If you don't I have no doubt that the Trustee will go after your BIL for the $$ you paid him at close of escrow.

Des.

[bbnet]

You absolutely have a preference problem.

The loan was taken out in 2/10. It was suppose to be secured but the security interest was not recorded (perfected) for 8 months. This means there was no contemporaneous exchange which runs afoul of 547(c)(1) and falls under the category of 547(e)(2)(B). You then sold the collateral and paid off your BIL in 12/10. Since, by the recording (perfection) of the security interest, you put a family member (by marriage) in a better position than any other unsecured creditor and then paid him, you need to wait the 1year preference period. If you don't I have no doubt that the Trustee will go after your BIL for the $$ you paid him at close of escrow.

Des.

OK thanks for your feedback...Des....I was suspecting this scenario.....If I wait I will have some judgment liens on Home to deal with .....So either Risk $45k with Bro in law or hopefully remove $ 400k of liens(4-5) after the fact.....?

[despritfreya]

If I wait I will have some judgment liens on Home to deal with .....So either Risk $45k with Bro in law or hopefully remove $ 400k of liens(4-5) after the fact.....?

I assume you are worried about judgment liens against your homestead residence. I believe GA has a $10k exemption (20K if married). If judgment liens impair your exemption and there is no state statute dealing with this issue (in my state judgment liens do not attach to a homestead unless the homestead's equity is above the allowed exemption), you can utilize 522(f) to remove judgment liens that impair your exemption. Otherwise, since the debt is discharged, the creditor cannot renew the judgment or the judgment lien so eventually it will become stale - again, based upon state law.

Hope this helps.

Des.

[bbnet]

I have Zero Equity in Home and I am "upside down". (So exemption N/A) ?
I will check with BK attorney on potential lien removals.
Thanks BB

[AngelinaCatHub]

BTW, you sold the land for 95K. What did you do with the residual money? If hoarding it, you got a big problem. If you use it to stall some of those suits that would help you. 'Hub

[HHM]

I assume you are worried about judgment liens against your homestead residence. I believe GA has a $10k exemption (20K if married). If judgment liens impair your exemption and there is no state statute dealing with this issue (in my state judgment liens do not attach to a homestead unless the homestead's equity is above the allowed exemption), you can utilize 522(f) to remove judgment liens that impair your exemption. Otherwise, since the debt is discharged, the creditor cannot renew the judgment or the judgment lien so eventually it will become stale - again, based upon state law.

Hope this helps.

Des.

Good call, I must of of only briefly read the post, I somehow missed the fact that the land was sold. As for the note, there was still a note, it just wasn't perfected. The issue there will come down to state law and the underlying facts as to whether you have a true preference issue. If your state takes a hard line view or has statutory language about when a deed must be recorded, you have a problem; if your state takes more of an "intent of the parties" view, the so long as the deed was recorded at some point, you may be okay on the preference issue.

As hub points out, if you sold it for $95K and the note was only for $45K, where did the rest go...that is even a bigger problem than the preference issue.