No one dreams of filing bankruptcy. In fact, most people try to avoid filing bankruptcy by exhausting every other means available to pay their bills. For some people, there is just no way to pay their bills with the little money that is left over each month after paying their living expenses. Picking and choosing which creditors to pay could create preferential payments but some creditors are heartless to your financial situation and will harass you endlessly until you pay the debt. When there is absolutely no way for you to pay your bills, bankruptcy can help you.
Filing bankruptcy will give you the relief you need to recover from a financial crisis such as losing your job or dealing with a medical emergency. It will also give you the same fresh start if you have mismanaged your finances and need help beginning again on a stronger financial footing. Regardless of the reason why you are experience debt problems, bankruptcy will erase thousands of dollars in debt while protecting your property. However, you must remember there are rules that you must follow when you file bankruptcy. Hiring an experienced South Jersey bankruptcy attorney is your best option to ensure that your bankruptcy is filed correctly. For example, your attorney will make sure that preferential payments are correctly reported to the court.
What is a Bankruptcy Preferential Payment?
The Bankruptcy Code defines a preferential payment as a payment on pre-existing debt that is made to a creditor within 90 days of filing bankruptcy. If the creditor is an insider such as a family member or business partner, the look back period is extended to one year prior to filing. A preferential payment creates a situation where a creditor could receive more money than it would through a Chapter 7 liquidation. The preferential payment benefits the creditor unfairly because it received something that the other similarly situated creditors did not receive. The creditor may have harassed the debtor into making a large payment by threatening to file a lawsuit or threatening to garnish wages. Regardless of the reason why the preferential payment was made, it should be reported on the debtor’s bankruptcy filing.
A Chapter 7 trustee reviews the debtor’s financial situation and history including payments made within 90 days (one year for an insider) prior to filing bankruptcy to determine if any payments are preferential. If so, the trustee has the option of suing the creditor to reclaim the preferential payment for the benefit of all unsecured creditors. Unfortunately, the debtor does not receive this money back. The trustee uses these funds to pay the unsecured creditors on a pro-rata basis so that all creditors are treated fairly. On-going payments for mortgages, car loans and other secured loans are typically not considered preferential payments.
As we are preparing your bankruptcy case for filing, the attorney will discuss preferential payments with you at length to determine if we need to disclose any of the payments you made within the look back period on your bankruptcy forms. The trustee will then make the decision whether he believes this is a preferential payment and if he feels any action is necessary.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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