If there is a frequently overlooked rule in the world of bankruptcy, it is the rule concerning recent payments to insiders. This rule is very important, because it can sometimes mean the difference between whether one can and/or should file a St. Louis Chapter 7 bankruptcy.
The question at issue is: Have you either 1) paid back or 2) given away more than $600.00 to friends or family within the twelve month period prior to filing for bankruptcy? If the answer is yes to either, it doesn’t mean you cannot file a petition for bankruptcy relief. But it may push you into a St. Louis Chapter 13 repayment plan.
Why? Well, let’s say your particular case is on the surface a clear-cut Chapter 7. You’re below the median income, you have no assets with considerable equity, and you have tons of credit card debt and medical bills that you’d love to get rid of. But six months ago, you came into some extra money, so you decided to pay back that $2,500.00 loan from your older brother. You figured if you had the cash, you might as well make good on a family debt. Fast-forward six months to the present, and you are meeting with a St. Louis bankruptcy attorney, being asked questions about payments to creditors over the last year.
Being the honest person that you are, you disclose the fact that you paid back your brother $2,500.00 six months ago. The St. Louis bankruptcy attorney then tells you that if you file a Chapter 7, you will either have to pay that amount to the Trustee, or else the Trustee can go after your brother for the $2,500.00 you paid him (and hopefully your brother still has the money). In the alternative, the bankruptcy attorney says that you could file a Chapter 13 bankruptcy, which will protect your brother from the Trustee, but will now require you to pay back the $2,500.00 in monthly installments.
So at this point, you are beyond irritated. All you’ve done is asked for some advice on bankruptcy, and the attorney is making it sound as if you have committed a crime because you paid off your older brother. But if you think about it, the attorney has actually given you some valuable information. First, you now know that filing at this very moment in time may not be the best idea (for the sake of your brother, and your ability to file a Chapter 7). But more importantly, you now know how much longer you need to hold off before filing for bankruptcy (which in the scenario above works out to be about six more months).
If you have questions pertaining to this type of situation, or anything else related to bankruptcy, you should not hesitate to call the St. Louis bankruptcy attorneys at Brinkman & Alter, LLC. We would love to hear from you, and every consultation is free of charge.