Rent & Preferential payment

[seFlaDude]

This might be a no brainer question, But is renting a house from in-laws going to be considered a preferential payment?

[MSbklawyer]

This might be a no brainer question, But is renting a house from in-laws going to be considered a preferential payment?

No. A lessor (i.e. landlord) is not a creditor with respect to ongoing rent payments and ongoing rent payments are not "for or on account of an antecedent debt owed by the debtor" -- both requirements for a transfer to be a considered a preference.

http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000547----000-.html

Now, if you owed your lessor / in-laws back rent and paid it off within 1 year (1 year since in-laws would be considered insiders) prior to the filing date, you would likely have a preference problem. But ongoing rent is generally not a preference no matter who you pay it to.

[frogger]

No. A lessor (i.e. landlord) is not a creditor with respect to ongoing rent payments and ongoing rent payments are not "for or on account of an antecedent debt owed by the debtor" -- both requirements for a transfer to be a considered a preference.

Correct. However, please make sure that you do a written lease, signed by both parties in order to be able to document your situation.

[MSbklawyer]

Correct. However, please make sure that you do a written lease, signed by both parties in order to be able to document your situation.

Yes, documentation would definitely work in your favor. And make sure you're paying only fair market value for what you're renting. If you are funnelling money to your inlaws by paying substantially above the fair market value, the trustee may challenge it as a fraudulent conveyance.

[seFlaDude]

Thank you for the replies, and yes I do have a lease, this is all above board they are just nice enough to lease to us at an affordable rate