Preferential Debts+341 meeting

[Needing Help]

I am a bit concerned... I have paid off someone who I owed money to, and am listing them as a preferential debt, however the other person who loaned us money is NOT getting paid before the bankruptcy, and he is pissed.

What could happen if he shows up at the 341 and starts asking,"What happen to the money loaned to them by XXX?" etc. Does he have that right to know about other debts?

[lrprn]

I have a bunch of questions to ask...

Is creditor #1 an insider (family member, business partner, etc) or an unrelated creditor? How much did you pay creditor #1? When did you pay them in relation to filing? What did you mean when you said you are listing creditor #1 "as a preferential debt"? Is creditor #2 who you didn't pay an insider or an unrelated creditor?

If you paid creditor #1 more than $600 within the last three months (and it sounds like you may have), then if your trustee finds out about that payment, it's likely that the trustee could start court proceedings to get that money back from creditor #1 as a preferential payment to distribute to the rest of your creditors. If creditor #1 is an insider and you paid them a goodly sum (like more than $1000) over the last year, then you've opened yourself for a potential charge of trying to hide assets - not a good thing.

Does creditor #2 understand that if you did pay him/her more than $600 now, they could lose that money to the trustee as a preferential payment?

What does your lawyer have to say about all this?

[Needing Help]

Thank you for the response... here are the answers to your questions. Hopefully this will help you answer my concerns...

First of all.. filing a chapter 13.

Cred. #1 is an "insider", who invested in the business and got repayed BEFORE I thought we were going to lose the business.. about 3 months ago. Paid him back $23,000, (which we will be able to pay back within the 1st 23 months of the plan, so attn. says it shouldn't be an issue with the trustee)

Haven't filed yet, but probably will in a month or so.

I suppose creditor #2 would be an insider. (not Visa or major company... just an individual Loan)

Creditor #1 does NOT know about the bankrupcty, but unfortunately it looks like he'll have to sign a waiver saying that if I don't complete 13, he may have to give up money.

I'm just concerned creditor #2 will cause a "fuss" at the 341 and make the trustee question the decision to NOT touch the 23K for #1.

Thoughts?

[lrprn]

Thanks, NH - your answers help a lot.

Creditor #1 does NOT know about the bankrupcty, but unfortunately it looks like he'll have to sign a waiver saying that if I don't complete 13, he may have to give up money.

Yes - that's typical in this kind of insider payment pay-back arrangement with the court.

I'm just concerned creditor #2 will cause a "fuss" at the 341 and make the trustee question the decision to NOT touch the 23K for #1.

Any creditor has the right to object to the discharge of their debt, but they have to prove that you took the money fraudently knowing you were going to file bankrutpcy and wipe out what you owed them. Frankly, it's not that easy to do.

Your creditor #2 can file an objection stating *his* debt should not be discharged, but he has no say about any other debt. Since the trustee has already agreed to you paying back the preferential payment to creditor #1 inside your Ch 13 plan, there's nothing creditor #2 can do to upset that.

[Needing Help]

Thank you very much for the help.

There was also a Creditor #3 in the same arena, but my spouse and I have Legally Separated, and she took that debt in the decree.

I just picture this person saying "why did they get paid back, and not me... yada, yada".

So, if I am hearing you right, that would be a mute statement, as they has no control over the other debts I have, correct?