Preferences

One issue that comes up periodically – especially during the federal tax season – is the payment of money to friends or relatives.  When people are in financial distress they often borrow money from family or friends.  And when they receive a large tax refund they often pay them back.

The problem with this is that a large payment to a friend or relative (referred to as an “insider”) is a preference payment that can be reversed by the Court when you file for bankruptcy.  The is because you ‘preferred’ payment to the insider instead of an equal distribution to all of your creditors.  Such preferential payments made within one year of filing can cause problems.  Best to call an attorney if filing a bankruptcy is a possibility and you owe money to friends or relatives.

DISCLAIMER: The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between this attorney and the reader.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s