Insider preference issue

[Nowwhatohio]

Please don't get angry if this has been addressed before I am new here.

I had a significant other for the past 6 years. We are not related, we are not married and we recently broke up (and are amicably roommates for the last year).

The problem is, 6 years of combined finances have made a real mess for me. I have about $50,000 in credit card debt and make less than my state's median income (but by January after raises I will be over the median). I want to declare Ch. 7 but an issue I researched is worrying me.

My ex and I would transfer money back and forth between checking accounts as the years went by. We would also pay each others CC payments depending on who had more money in their account at any given time. We had a few business ventures, the most recent which ended in May. Don't get angry with me when I say the venture was partly funded using credit cards. When we decided to pursue other things the proceeds from closing the business were deposited into her checking account and she used about $20,000 to pay off three of my credit cards.

In researching my bankrupty options I came across the information that any total transfer to an "insider" (assuming arguendo she will be designated an insider) over the amount of $600 - 1 year previous to filing may be avoided.

So I went through my MS Money file and totaled all the back and forths (I included checks written to each other and payments she made towards my credit cards). After I total everything out, it appears I owe her about $8000 (meaning all her checks to me and credit card payments to my cards were more than all the checks I wrote to her, etc).

Issue 1) Will the trustee include CC payments from her to my cards in deciding the amount of a possible preference

Issue 2) As it stands it appears I owe her money, so would she be a creditor in the bankruptcy

Issue 3) If they strip out the CC payments made by her to my cards, it appears she owes me about $8500 - will the trustee or whoever go after her?

Issue 4) This all seems kind of stupid to me - we were a couple and would use money towards rent or utils or business ventures - will the Trustee just look at the situation and see we were a couple and let it go?

Issue 5) If they see we were a couple, will she be forced into the bankruptcy (she can't I don't think, she has a 5 year old Ch. 7)

Issue 6) If I wait a year before the last "preference" I will have to go through the means test and I don't think I'll still be in Ch. 7 land (Ch. 13 is something I really don't want to do)

Thanks in advance!

[Minnymouth]

I'm not certain but I believe Ohio is a "commonlaw state"....... meaning she was your commonlaw wife.

Did she have access to your cc cards and you hers? Were your name on any of her accounts and vise versa..... checking accounts, bills, etc?

You paying her would be considered preferencal payments possibly, but her paying you would be considered income to you.

You need to sit down and discuss this issue with a bankruptcy attorney for your state, as commonlaw marriages are recognized by the Court.

Did you own joint property together? or both names on deeds or loans?

All these would be issues in a bankruptcy.

She doesn't have to claim bankruptcy with you, but whose name is on what could be the issue.

Unusually high deposits to your checking account and vise versa could be an issue in a bankruptcy...... kind of like an inside trader. Showing preference.

Find an attorney, get answers to all your questions from him, but the fact that you were never married, really does not involve her in the bankruptcy unless you have been hiding money in her accounts.

Keep us posted.

[Minnymouth]

By the way we don't choose which form of bankruptcy we want to do unless the Court agrees with it. You have to qualify for a Chapter 7 or be able to pay a Chapter 13. It also depends on what you want to keep in your bankruptcy (property, home, business, auto, etc) whether you file 7 or 13.

There are certain critera and guidelines that must be met for each.

You can file a Chapter 7 but if the means test shows that you qualify for a Chapter 13 you can be forced into a Chapter 13.

[Nowwhatohio]

There is no longer common law marriage in Ohio since 1991. IMHO it's not like insider trading, it's like putting $600 into her account after she sent a rent check.

And in response to your 2nd post - I make below the median income so the means test will not apply and I have no assets or a house.

[Minnymouth]

I'm not sure how the court would handle you paying her for paying the rent? She lived there too...... you were reimbursing her......

Since your are below the means test, then you should fall in a simple Chapter 7 case if there has been on preferencial payments to anyone.

[Nowwhatohio]

I appreciate your reply but you are not helping me. Your answer assumes away the issue I am asking about. I'm not asking if I can file Ch. 7 or not.

[whatamess]

Complicated

I doubt anyone here can answer this. Family/roomates/non-married couples living togther are one of those areas where maybe only a lawyer can take a guess. Even so, the trustee may decide different and it could go either way.
My husband and I are living with my mother right now, and the money transfers are causing us a big headache. The lawyer doesnt seem to think its TOO much of an an issue, but who knows what the trustee will think.
My guess is your roomie will be a creditor in the bankruptcy, her monies paid to the CC bills is a big questionmark though really. Talk to a good lawyer and good luck. Let us know, as it should be interesting.
WAM

[Nowwhatohio]

Thanks

I think I'm going to have to wait a year to file as the last transfer between our accounts was this month - and I can pay minimums until then. My income will increase to just $250 under my state's median income in January 08 then it will increase to about $1200 over the median in July 08. So basically I have a window of 3 weeks to file next year (June 08 no more transfers within the year, July income adjusts over the line in the sand)...oye.

From reading the bankruptcy manual sticky (thanks to the author btw), it appears I need to start collecting lots of paperwork too.