WEIRD SITUATION need Help, TT trying to recover 14k from another party..

[shabam]

Please don't bring politics into this discussion.

agreed and corrected.

What do you think about the above scenario I posted? I have not been able to find any information on it.

[hereforinfo]

So if the MIL had just written the check to herself and spent it on a lavish vacation or gambled it away, the trustee would have no problem with it. But she gave it to her husband to spend legitimately on business expenses and he's going after it? That seems jacked up. I can see how giving a large cash advance to the non-filing spouse might raise an eyebrow, but come on. This trustee is out for blood.

[justbroke]

If your MIL had paid your FIL's credit card (creditor), would this be considered an insider payment or a payment to a creditor?

The law cannot be stupid enough to have a 90 day look-back for your MIL paying her creditors (even with debt) but a 1 year look-back for her paying a spouse's creditor right?

Absolutely it does. The reason is purely because of the abuse that former debtors have bestowed upon the process. It was common for debtors to transfer real and personal property (including money) to spouses or other family members, in order to move the assets outside the reach of creditors. This is why an insider is a particular area that is of concern. There was a poster here just in the last week who purposefully transferred property to a close family member so that creditors wouldn't be able to get to it.

However, I do see a distinction in your scenario. The MIL paying the spouse's creditors may not be payment to a creditor. This could get tricky in community property States. However, this may still be construed as a tactic to avoid paying certain creditors over others (which the preference avoidance is all about).

It is quite common that the Trustee has been just going after anything even remotely paid to an "possible" insider within 90 days of filing. Just as a general strategy. Sure, they are just money hungry... the system was designed this way so that they'd (the UST) would have more incentive to pursue possible fraudulent transfers / preferential payments.

[shabam]

So if the MIL had just written the check to herself and spent it on a lavish vacation or gambled it away, the trustee would have no problem with it. But she gave it to her husband to spend legitimately on business expenses and he's going after it? That seems jacked up. I can see how giving a large cash advance to the non-filing spouse might raise an eyebrow, but come on. This trustee is out for blood.

Exactly. I would understand if she transferred the cash and then filed but to 'chase' her spouse after she settled with the creditor is a low blow.

She borrowed the money and made over 6 months of payments. Had she literally burned the cash, the trustee would not have said anything.

[shabam]

Absolutely it does. The reason is purely because of the abuse that former debtors have bestowed upon the process. It was common for debtors to transfer real and personal property (including money) to spouses or other family members, in order to move the assets outside the reach of creditors. This is why an insider is a particular area that is of concern. There was a poster here just in the last week who purposefully transferred property to a close family member so that creditors wouldn't be able to get to it.

However, I do see a distinction in your scenario. The MIL paying the spouse's creditors may not be payment to a creditor. This could get tricky in community property States. However, this may still be construed as a tactic to avoid paying certain creditors over others (which the preference avoidance is all about).

It is quite common that the Trustee has been just going after anything even remotely paid to an "possible" insider within 90 days of filing. Just as a general strategy. Sure, they are just money hungry... the system was designed this way so that they'd (the UST) would have more incentive to pursue possible fraudulent transfers / preferential payments.

If this is the case I am screwed. I regularly transferred balances between my wife and myself to utilize the best offer at hand. For nearly a year the majority of the debt has been in my name, therefore, I am the one who is filing. Based on this thread, a trustee could screw us and say that transferring the debt from my wife's creditors was an "insider payment", regardless of the fact that the last transfer occurred over 8 months ago.

I would have understood if the BT check went directly into an insider's bank account and they basically spent the money. In situations with married couples, clearly anyone who transfers money back and forward is unknowingly setting themselves up to have the debt avoided.

[justbroke]

If this is the case I am screwed. I regularly transferred balances between my wife and myself to utilize the best offer at hand. For nearly a year the majority of the debt has been in my name, therefore, I am the one who is filing. Based on this thread, a trustee could screw us and say that transferring the debt from my wife's creditors was an "insider payment", regardless of the fact that the last transfer occurred over 8 months ago.

If you're in a community property State, I don't think it would matter. However, if you decided, for instance, to protect all your wife's creditors (so you'd still have access to credit), while you didn't pay your creditors and then filed bankruptcy only for yourself... it could be interesting. I don't really have an opinion on it. It's just real interesting to me.

[shabam]

If you're in a community property State, I don't think it would matter. However, if you decided, for instance, to protect all your wife's creditors (so you'd still have access to credit), while you didn't pay your creditors and then filed bankruptcy only for yourself... it could be interesting. I don't really have an opinion on it. It's just real interesting to me.

Not in a community state, we're in MD.

I guess the question is whether transferring debt from a spouse is the equivalent of transferring an asset and whether paying a spouse's creditor is the same as paying your own creditor. Particularly if it is the normal course of business, per say. I would think creditor means creditor but as we know in legal terms, what we think is irrelevant.

In the mysticspirit25 MIL case, she did not owe her spouse any money, therefore, how can this be considered a preferential insider payment? If the MIL had gone out and spent the $14k and continued to make payments for 6 months, as she did, the trustee would not have any issues. The fact that she used it (the debt) to assist a spouse and it somehow constitutes breaching 547 and 548 for the trustee, concerns me.

[shabam]

The interesting thing is where would you even enter any transfers (payments per say) to a non-filing spouse's creditors on a Ch 7 application.

For example:
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Question 3. (a) of the statement of affairs refers to payments to creditors for debt owed prior to 90 days. Section (b) refers to all payments made within a year to the benefit of creditors (obviously owed money too) who were insiders.

Neither of these sections would apply since creditor refers to someone you owe money to.
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Question 7. Gifts would not apply as you are not giving a gift.
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Question 10. Other transfers

Refers to property which would not apply either.
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[justbroke]

In the mysticspirit25 MIL case, she did not owe her spouse any money, therefore, how can this be considered a preferential insider payment?

Exactly, but as I stated, many Trustee's don't even care to differentiate and will just litigate it through a Complaint. This makes you have to prove that it isn't. Smart move on their part.

If the MIL had gone out and spent the $14k and continued to make payments for 6 months, as she did, the trustee would not have any issues. The fact that she used it (the debt) to assist a spouse and it somehow constitutes breaching 547 and 548 for the trustee, concerns me.

I don't know how the Trustee gets there, but it's probably buried in the Committee notes, which I looked at, and did go into depth on spouses as transferees. It may just be pure a fraudulent transfer. I don't know how you connect the dots, but this is probably what the Trustee is thinking. The money was moved to the spouse to keep the MIL's creditors from getting it. Yeah, it's a leap.

[shabam]

You're not going to believe this, I am a few days shy of one year between the majority of my transfers. With one of them for $10K being one day shy of a year.

I'm screwed. If I get through bk without being discharged or even jailed it will be a miracle. Transferring half the debt under my name and filing alone is a huge mark and can of worms. I also made the huge mistake of effectively overstating my income on some cc applications by stating anticipated income of my spouse finding a job rather than our actual income at the time of application. Only after facing the reality of no work for my spouse and looking into BK did I found out that it is clear cut case of fraud. Unfortunately there is no turning back once you have submitted the application and ignorance of the law is no excuse.

Even balance transfers can technically be made out to be a form of kiting. Something people have been imprisoned for. I better start reading up on life in Leavenworth.

[eddiep]

They can put you in jail for inflating income on cc applications? Should I plan on bringing my toothbrush to the 341?

[justbroke]

They can put you in jail for inflating income on cc applications? Should I plan on bringing my toothbrush to the 341?

I've never heard of anyone going to jail for inflating income on a CC application. The bank has a fiduciary responsibility to validate it. If you were just doing plain fraud... that's different.

I believe Shabam's description was extreme. Yes, there are people who fraudulently obtain money and, yes, kiting is actually illegal. However, I know no one personally ever who has been convicted of lying about income on a credit application. Now lying about your identity, using improper addresses, or otherwise attempting to or actually defrauding a creditor, is illegal.

A creditor should do their due diligence to check all other things (income, credit, employment, etc).

If lying about income on a credit application would put you in jail... probably a good 10% of people who did those "Stated Income" mortgages would all be in jail... LOL.

But it is a big issue. I'll end with this. Speculating about what you expect to happen, is not lying... it's speculation. While I never lied about my income, I certainly was building my whole portfolio on being able to rent out multiple housing units. That never came to fruition. Should I be jailed because of a failed business plan? I know, there's some distinction between a plain straight lie and assumptions.

[shabam]

They can put you in jail for inflating income on cc applications? Should I plan on bringing my toothbrush to the 341?

There is one case where a couple was jailed for inflating income and using BT checks to get by. They were charged with bank fraud, false misrepresentation and check kiting; for using BT checks to pay another credit card. Given, these guys had $189k in unsecured debt and claimed they earned $80K and upwards on their applications, while earning between $2 to $25K. The UST lost the motion to dismiss, consequently, the FBI pursued them and charged them.

Regardless of the fact that cc applications are vague/ambiguous and ask for nothing more than annual household income, which really means nothing, from the legal perspective it's up to the applicant to ensure the details are correct. Not one of the creditors was ever asked whether they used any due diligence to verify their income. During the trial the cc companies stated that "income plays a large part in their decisions", which is absolute bc since 24/7 we hear about credit scores.

[music12]

wow. so i guess sometimes it's better if the UST wins a motion to dismiss, otherwise the FBI would get involved!?!?!

seriously, maybe saying 80K when it's 15K is a bit extreme, but if everyone who fills out a cc application with a little bit of wishful thinking were in jail now, they'd have to raise everybody's taxes.

[shabam]

Found the case. Search for Honarvar and Zamanian in google. I pulled all of the Ch 7 and court documents from pacer too as I found the case fascinating. However, I was shocked to see that this couple was jailed for fraud when cc companies do little to nothing to verify cc applications. Furthermore, many of the applications I receive in the mail ask for a minimal amount of personal details. Their lives are ruined yet the cc companies walk away with not even a slap on the wrist or even a warning. They sure can call you 20 times a week when you're late but cannot make one phone call to verify your details and simply ensure you understood an application.