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Sunday, June 26, 2011

Can I Repay the Debt I Owe to Aunt Myrtle Just Before I File My Bankruptcy?




Repaying relatives within a year of filing your bankruptcy is an issue that comes up frequently.

The reason it comes up frequently is that there is a period, prior to filing, when an ordinary debtor may not be paying the mortgage on the upside down house, because they're going to be filing a bankruptcy.

And during that period the debtor is unlikely to be paying credit card debt, because, well, they're going to be filing a bankruptcy!

So they have a little extra cash, and they really like Aunt Myrtle, who came through with a loan for them when they needed it most, as family will.

So they pay her back, and then they file a bankruptcy, and then the trustee gives them the choice to pay him, or for him to sue Aunt Myrtle for recovery of the preference payment.

And that's gotta be hard to explain at Thanksgiving Dinner!

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