Mortgage..I always have something to keep me awake

[Waited2long]

We will be filing for chap 7 soon. Attorney is currently working on it. My latest worry is about our house we bought a year ago. 2 siblings and I inherited it, it was in a trust and was protected from probate. Same attorney processed sale of it to my wife and I and we paid fair market value to my brothers less my 1/3 inheritance. Everything was done "at arms length" as my attorney says. Deeded from trust to brothers and sold to us. All recorded at the reg of deeds. He created a mortgage and note and my brothers are the mortgage holders. The mortgage is written exactly as it would be from a bank and filed with the reg of deeds. We have enough of an exemption to cover our equity.

My worry, which my attorney says is needless, is that the monthly payments made to my brothers might make it look like I am giving them preferential treatment. He says the house is exempt, we can afford it, we are current and it would be treated like any other exempt asset. Can anybody speak to this and help calm my nerves!

[Chowder]

Ask your attorney how well he/she knows the BK trustees(s).

Are you paying the Trust or the brother? and is his surname the same as yours?
Otherwise, there's tons of ways to make those payments without leaving a direct trail.

[Waited2long]

Ask your attorney how well he/she knows the BK trustees(s).

Are you paying the Trust or the brother? and is his surname the same as yours?
Otherwise, there's tons of ways to make those payments without leaving a direct trail.

Paying my brothers who are the mortgage holders. We do have the same surname. The house was deeded out of the trust and then sold to me.

[Waited2long]

I found this definition on line:

preference or preferential debt payment A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor's chapter 7 case.

So since the house will be exempt in my case I think this would mean the creditors ( my brothers) did not receive more than they would have received in my chap 7 case. Or am I interpreting this wrong?

[Chowder]

Yep. Bottom line, as long as you're paying FMV, you're good.
You sound like you're concerned because of the illusion of impropriety. If so, there are ways around it. Otherwise just explain it, should it come up.

[Waited2long]

Yep. Bottom line, as long as you're paying FMV, you're good.
You sound like you're concerned because of the illusion of impropriety. If so, there are ways around it. Otherwise just explain it, should it come up.

Thanks Chowder! Great to hear. Kind of what my attorney said but who trusts them! It's not his house.

[daylate]

Do payments on secured property count as preferential? I don't think they do. if that was the case then many people who were current on cars and or mortgages would be way over the 600 limit. Anyone?

[Chowder]

Do payments on secured property count as preferential? I don't think they do.

Normally, no.
Imagine though paying an insider well over FMV.

[daylate]

Two different issues. In this case, the mortgage isn't over FMV so OP should be ok.