Question On Insider Payments

[lostinnola]

My wife and I plan on filing chapter 7 in the next couple months due to drastic cuts in income (over $40,000 combined). We meet with our lawyer on Wednesday. My question is in regards to insider payments. My father in law gave us a loan for $28,000 a couple years ago. Over the last year we have paid $700-$200 per month to him, depending on what we had available. The $28,000 actually went to payoff debt that we had accumulated. Since we have quit paying our debts for the last month, we have not made a payment to him. My question is, will this be an insider payment or will he be considered someone that lended money to us?

[shabam]

Yes the is definitely an insider payment. In particular, any payments you made to him within the last year.

[lostinnola]

So there is no way to protect him? I assume he will have to give them whatever we paid him over the last year?

[lostinnola]

That is really frustrating. We hadn’t planned on filling bankruptcy until the last couple weeks. We had paid all of our bills on time and weren’t paying him anything special. I understand why it is a rule but there should be some type of exception or something.

[shabam]

Personally, think the rule is unfair. A debt is a debt. A one year lookback is not fair due to the reason you stated. How many people know a year prior that they are going to file and they should not pay an insider for the duration of the year more than $600? What can we do about it though. The time period was recently extended in the last bk amendment.

What suxs about it is that your FIL may dragged through the BK with you. He will not get in trouble or anything like that, he just may have to pay the trustee back the money he received within the year. Also keep in mind once the BK is over, as in discharged, you are free to continue paying you FIL back.

[AngelinaCatHub]

I was not aware that the lookback is a year now. 90 days was it. Stop paying him the same as any debt for 90 days. See what the lawyer says. Explain it to Dad. I was an insider payer and had to pay 5K back to keep my god-daughter from having to pay it. I would chance the 90 day thing or hold off paying for a year. He MUST be declared a debt though unless he actually forgives the debt. Time is your friend if you can afford the pain. 'Hub

[lostinnola]

Thank for the response. We can probably hold out 90 days (we haven't paid in 30) but we don't have a year. Our income went from $90,000 down to $30,000-$35,000 per year so needless to say, it won't take companies long to come after us.