Here’s an example of a preference—paying a favored debt before filing bankruptcy. If you know what it is, it’s usually not hard to avoid. Last week we explained why paying a creditor before filing bankruptcy could cause problems during bankruptcy. That’s especially true if the creditor you pay is one that you have personal reasons to favor. We explained the circumstances in which such a … Read More
Filing bankruptcy stops garnishments and collections, but it also may be able to make a creditor return your money recently taken from you. Bankruptcy’s “automatic stay” is one of the most immediate and powerful benefits of filing bankruptcy. It immediately stops almost all creditor collection actions against you, your income, and your assets. See Section 362 of the U.S. Bankruptcy Code. … Read More
Sometimes in bankruptcy doing the honestly right thing can cause you major problems. Making preference payments is a good example of this.
Make your bankruptcy trustee work for you by retrieving your recent payments to, or garnishments by, creditors–to your benefit.
Prevent your trustee from giving you a big headache if you paid a debt to a friend or relative during the year before filing bankruptcy.
Avoid the frustrating surprise of having one your friendly creditors be challenged by your bankruptcy trustee with a preference action.
Preferences can be dangerous but can also present potential opportunities. So although not all that common, they’re worth knowing about.
You may have extra motivation and greater ability to repay a personally important debt this time of year. But maybe you shouldn’t.
Doing what you believe is the right thing can backfire, if you pay a special creditor before you file bankruptcy.
Not a good idea. If you do your friendly creditor may have to turn over to the trustee whatever you paid it. So it wonât be so friendly.
If you’re careful it’s easy to avoid the rude surprise of hurting the friend, relative or other creditor you paid before filing bankruptcy.
Even though it’s already past Thanksgiving, there’s plenty more to be thankful for in the bankruptcy laws.