In most cases, individuals and small businesses fight against filing for bankruptcy until it becomes clear that it is the most sensible option. In many cases, before the decision to file for bankruptcy is made, the filer attempts to meet or repair debts in many ways. Payments or money transfers are common occurrences before bankruptcy petitions are filed, but in some situations, those transactions might be reversed after your case is filed. Behm Law Group, Ltd. offers legal advice and assistance to help you understand how your case will unfold when you file for Chapter 7 bankruptcy in Marshall, MN.
In a Chapter 7 bankruptcy case, the bankruptcy trustee is a fiduciary for creditors and the trustee is obligated by the bankruptcy code to ensure that the person filing for bankruptcy is forthright and honest and that he or she has listed all of his or her creditors and listed all of his or her assets. The trustee is also tasked with making sure that the process is fair for all creditors and making sure that all creditors are treated equally.
One responsibility of a trustee in the trustee’s role of making sure creditors are treated fairly and equally is to identify and recover any preferential transfers in a bankruptcy case.
If you have multiple unsecured creditors (creditors that do not have collateral securing the debts) in your case and, within the ninety days prior to the filing of your case, you have made payments or transfers to any one creditor totaling $600.00 or more, this is considered an avoidable preference. This means that you have preferred one similarly situated creditor over another creditor who may not have received any payment. If a trustee finds that you preferred one creditor over another, the trustee will be obligated to avoid the preference by demanding a refund of what you paid from the preferred creditor. The trustee will then distribute that amount equitably among all of the similarly situated creditors.
Preference claims can either be voluntary payments you made or involuntary garnishments from your pay checks or bank accounts. For creditors labeled “insider creditors”, such as your friends or family, any payments totaling $600.00 or more made within a year of the date that your case is filed will be deemed a preference. If you pay a friend or relative more than $600.00 within a year before your case is filed, the trustee can and will demand a refund and disburse it among all creditors. For other creditors, such as credit cards and medical debts, known as “arms-length creditors”, payments of more than $600.00 within ninety days before your case is filed will be deemed preferential.
To reverse any claims deemed to be preferences, the trustee has the right to use his or her “strong arm” powers under the bankruptcy code and undo the transactions.
If you suspect you may have made a preference payment, or if you have other concerns about your situation, you should not try to undo or reverse it. Behm Law Group, Ltd. can help you throughout the process of filing for Chapter 7 bankruptcy in Marshall, MN. For more information, please contact us at (507) 387-7200 today.