Closing an account before filing

[okane]

I was wondering, my Dad is co-signor on my discover card. It has a balance of about 1500. I want to get this account paid off before I file bankruptcy so they do not go after my Dad for the debt as joint account holder. If I was to pay this off and close the account, then file bankruptcy within 3 months after, will the trustee find out and take that money since it was over $600 pmt to a creditor within 90 days?

[Minnymouth]

A BIG YES.....................

Minny

[okane]

How about more than 90 days

If its over 90 days since pmt was made, will they still on the closed account?

[Debtsarenogood]

For a trustee to bring a preference action, they can only look back 90 days from your filing, so technically if you pay off your discover card and then wait over 90 days this is not a preference. Also a trustee can only bring a preference action for a payment over $600. So if you make 3 payments of $599, $599, and $302,...none of these payments are preferences.


This is not illegal to time your payment, it is simply bankruptcy timing. Preferences are not like fraudulent transfers.

[Lightning]

Preferential payments are fraudulent.

[StaciMM]

It is not $600 in a single payment, but any payments made within 90 days of filing that total $600 or more. So paying $599, $599, and then $302 WOULD be an issue.

Okane-one thing to look into, it was 90 days under the old ways. I don't know if that changed. Other than that, if you have the ability to repay this creditor I think a logical question is where is that $$ coming from?

For a trustee to bring a preference action, they can only look back 90 days from your filing, so technically if you pay off your discover card and then wait over 90 days this is not a preference. Also a trustee can only bring a preference action for a payment over $600. So if you make 3 payments of $599, $599, and $302,...none of these payments are preferences.


This is not illegal to time your payment, it is simply bankruptcy timing. Preferences are not like fraudulent transfers.

[sunshine08]

Lightening is right Minny - preferential payments are a definite no no. It is one of the biggest red flags you could raise.
StaciMM is also correct - payments that total 600 or more to any creditor have to be listed. $199, $199, $199 doesn't have to be listed. $200, $200, & $200 do have to be listed.
You are treading on slivers of ice and the water is mighty cold, be careful.

[hhou812hh]

Correct StaciMM. 599 x 2 + 302 = 1500 and the trustee would get this back from the creditor.

Incorrect Lightning. Preferential payments are NOT always fraudulent. Unless okane is giving someone something of value below FMV it's not fraudulent. The trustee may try to get the 1500 back and the cosigner will be liable. This does NOT constitute any fraud was committed. Just a big inconvenience to your dad and Discover. After your discharge you can work it out with your dad somehow or wait past 90 days.

Good luck!

[Minnymouth]

Sunshine08 - ?? Did you misunderstand my answer to Okane's questions?

Okane asked if he paid off a cc worth $1500 would the trustee consider it prefrential treatment and seek the funds back from the creditor. I told him YES - the trustee can go after those funds..... if he so desires.

Prefrential treatment of one creditor over another is a NO, NO - but not always considered fraudulent. All secured creditors must be treated the same, and all unsecured creditors must be treated the same. You cannot "payoff" a secured creditor over a unsecured creditor. This the trustee can undo thru the court petitions.

If you paid a creditor $5,000 100 days before filing BK then I'm sure the Trustee would go back to that period to find out where you got your money from....

Same principal if you transfered a $100,000.00 CD from your name to your sister's name 91 days before filing BK.
You don't think a Trustee would question that??? You better believe he will!!!!

Most cases are only checked back 90 days before filing, but this does not mean that the Trustee can't go back further if he desires. Some Trustee go back 180 days regarding some issues (though normally not credit cards).

Remember the Trustee has the strong arm of the court behind him in his actions...... He can undo legal documents and many transactions by petitioning the court to do so.

Minny

[bezoar]

If Pop is really a cosignor and his neck (credit) is on the chopping block, I think that HE can pay it off (with his own money, of course). I've seen this come up a couple of times w/o any problem from the trustee, since dad's money & property are not part of your estate, and he is also liable for this particular debt. AFTER discharge, you may pay dad back.

You might check w/ a local BK atty, but I don't believe this would be a problem.

[Minnymouth]

Dad as a co-signer can call Discover and tell them he will pay the account.... Legally you will be discharged from the balance, but your dad won't....
Pay dad back and everything should be okay.....
Now if Dad doesn't know about your bankruptcy, then you continue to pay Discover each month till its paid off whether they are discharged or not...... that way Dad doesn't know about bankruptcy.....

I don't think it will appear on Dad's credit report because he is a co-signer.....

Minny

[StaciMM]

Yes, the cosignor can make payments and it would not be an issue. (But you can't give Dad the money so that he can make the payments.) I got the impression that the OP wants to NOT involve Dad though-I can understand that!

Also worth mentioning-payments/transfers to insiders have a longer problem-period that payments to creditors. If you pay family, friends, etc. for 1 year before filing, then it becomes an issue in the BK court.

Okane-I don't recall if you had something pending, like a foreclosure, garnishment, etc. to make filing ASAP important. If not, and you have no urgency to filing soon, I'd suggest 1st reseach to see if that 90 day window changes with the new laws. If not, your goal could be to pay $1000 (perhaps income tax $$) of the bill as soon as you're able to, then wait about 4 months - to be safe - after that to file. In the 4 months interim, you'd be ok to pay the remaining $500. I can understand wanting to protect your dad/cosignor...

That would probably have you filing around May/June of next year...

[StaciMM]

If the Dad can pay it off before Okane files, and she pays him back over time after the BK-no issues. (Paying him anything before filing would be a problem though.)

If you file on an account that has a cosignor, though, that person WILL end up knowing about the BK. Not only will the creditor start contacting the cosignor to demand payment, the account on the co-signor's credit report will have a note something like 'included in BK of joint account holder'.

Dad as a co-signer can call Discover and tell them he will pay the account.... Legally you will be discharged from the balance, but your dad won't....
Pay dad back and everything should be okay.....
Now if Dad doesn't know about your bankruptcy, then you continue to pay Discover each month till its paid off whether they are discharged or not...... that way Dad doesn't know about bankruptcy.....

I don't think it will appear on Dad's credit report because he is a co-signer.....

Minny

[Minnymouth]

StaciMM,
Yep you are RIGHT about the co-signer issue.... it will appear on his credit report as "included in BK on joint account". Got interrupted while I was trying to enter info, and lost my train of thought.

And yes he can pay his dad back after discharge, not during the bk process.

Minny

[StaciMM]

On a somewhat related topic, after discharge we'll be paying back my MIL for helping us catch up on rent, etc. in May of this year. Her requirement was that we have it paid back within a year. (By the time we're discharged, I should have a raise, and we will likely have a minor tax refund.)