30 Mar Ten Reasons to Delay Filing Bankruptcy! Reason No. 4: Pre-Bankruptcy Transfers
When filing aChapter 7 or Chapter 13 bankruptcyconsideration should be given to whether you have made any transfers which can be reversed. In certain situations the Trustee in your bankruptcy may be able to recover property or money that has been transferred and have those assets brought back into the bankruptcy estate to be available to pay your unsecured creditors.
Maybe you owe money to a friend or relative money before you file a Chapter 7 or Chapter 13 case, want to pay the debt back to them, and want to make sure they keep than money when you file for bankruptcy.
Under the Bankruptcy Code this transfer is considered to be a “preferential transfer” of property.
Preferentialtransfers canbe divided into three main categories:
- If paidfor consumer debt, a transferof property is worth more than $600.00 within ninety days of filing;
- If paid for non consumer debt, a transfer of property that is worth more than $5,850.00 within ninety days of filing;
- If the transfer is to an insider, the time to avoid the transfer is one year. Relatives are considered insiders for this purpose.
The policy behind allowing the Trustee to avoid these types of transfers is to treat all creditors equally.
If you care whether or not the creditor has to return the transferred property then you might want to wait until ninety days has passed from the time of the transfer before filing for bankruptcy.
It should be noted that while a preferential transfer can be reversed, such a transfer does not have any impact on your ability to obtain a discharge.
On the other hand a more serious transfer that can result in an objection to your discharge is a transfer that is made “…with the intent to hinder, delay or defraud creditors…” that is made within one year of filing for bankruptcy. A transfer that falls within this definition can result in an objection to your discharge in a Chapter 7 bankruptcy. Waiting a year from this type of transfer will limit the effect of the transfer on your discharge.
You should also remember that although the bankruptcy with legally discharge your obligation to pay debt, it does not prevent you from later paying back debts you owe to a friend or relative.
Preferential transfers are only one of thefactors that need to be considered when deciding when to file a bankruptcy, and every case is different.
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