Why you shouldn’t pay back mom if you are considering filing bankruptcy.

  • Jeremy Shephard
  • October 27, 2016
  • 0

Filing for a bankruptcy is a difficult decision to come to but if you are considering filing then there are some things to consider. When money is tight, it isn’t uncommon that decisions have to be made on who to pay with the limited resources you have. Oftentimes, people try to pay back mom or other relatives they have in the days leading up to deciding that filing for bankruptcy is necessary. The problem this poses is that that there is a bankruptcy trustee assigned to your case when you file for bankruptcy protection. That bankruptcy trustee has a job which involves undoing payments to insiders (oftentimes relatives, sometimes other closely linked individuals) paid in the year before filing for bankruptcy protection. What does this mean? It means if you paid Mom back $2,000.00 in the year before filing because you borrowed money from mom; the trustee can sue her if you file bankruptcy to get it back. The logic behind this is that you preferred paying mom over other creditors called a preference. The other creditors would have rather been paid something over the payment(s) to your Mom. If you are considering filing bankruptcy then you should think twice about paying Mom back and contact an attorney to discuss your options.

At the law offices of Andersen, Ellis & Shephard, we have represented thousands of individuals in consumer bankruptcy filings.

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