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Don't Pay Your Relatives Back During the Year Prior to Filing Your Bankruptcy! Preference Law, Right?

By Joseph McDaniel, Esq.

This is a quick reminder, because I just got a very sad email from a nice lady who has relatives who are being sued for a bunch of money they received from the debtors during the year prior to filing.

I'll come back and beat this to death soon, but for now the message I want you to take away is that you should not pay back relatives during the year prior to filing. Period. It's called a preference payment.

I'll give you chapter and verse next time, but don't be that nice lady who is distraught because she tried so hard to do the right thing and scrimped and saved to repay her relatives, only to get 'em sued when she filed a bankruptcy. By the trustee's lawyer. For their receipt of a preference. After a 2004 Exam of the debtors.

My heart goes out to her, but the bankruptcy planning maybe should have been better, right?

Full post as published by Arizona Bankruptcy Attorney Blog on February 17, 2011 (boomark / email).