HELP! Would this be considered preferential payment?

[SadDebtor2]

I'm considering filing for bankruptcy within the next 6 months. I have some money (not a lot - less than $5k) in savings.

My domestic partner, who I'll most likely list as a dependent on my paperwork, needs help making his car payment.

The total payoff amount on his car is less than $5k.

Also, our rental agreement/lease is on his name, so I pay rent to him and he pays the landlord.

If I give him $5k to pay off his car and list this money as paying the rent in advance, would this be a problem? Would the trustees considered these payments as preferential?

Thank you!

[SadDebtor2]

Would if, instead of giving the money to my boyfriend, I paid the car loan company directly?

[spidge]

I would have to say it would be a preferential payment, but the general rule is a 6 month look back. Are your finances combined? Is he involved in any way? There may be an issue of equity in the car and the allowance not covering it. If the value is too high on the asset you may have to pay that equity again through the payback amount. Yuck!

[despritfreya]

You are not dealing with a preference unless you are also on the loan and the obligation is unsecured. But you are not on the loan and the obligation is secured. Giving money to your partner either directly or indirectly would be a “gift” and subject to recovery by the Trustee as a fraudulent conveyance. Don’t do it.

You need to live off the money, utilizing it for your own personal expenses and keeping track of how the funds are spent.

Alternatively, find out if you can exempt the funds using some wildcard exemption (unused homestead) provision that may be available. If you can exempt the funds you need not spend them.

As to rent. . . normal rent payments (I assume 1/2 of the total rent he is responsible for) are not fraudulent conveyances since you are getting something of equal value (a roof over your head) in return.

Des.

[LadyInTheRed]

If you don't own a home and don't have other significant assets other than standard household items, you can most likely exempt $5,000 cash using the wildcard under California's exemption system 2.

[SadDebtor2]

Thank you! Am I allowed to give a $5k gift to someone before filing?

[chrisdfw]

Thank you! Am I allowed to give a $5k gift to someone before filing?

No, the trustee will sue them to get the money back

[keepmine]

why do you want to give something away that can be exempted?

[LadyInTheRed]

why do you want to give something away that can be exempted?

I think it is to help the domestic partner make his car payments.

[LadyInTheRed]

Does your domestic partner have something you can buy from him? This could be a solution, but you would need to be sure to document the purchase and pay fair market value for whatever you buy and be sure to list that item as an asset on your petition and exempt it.

ETA: You could loan him money and get a lien on the car. But, you need to make sure you perfect that lien (i.e., file it with the DMV) before you file BK.

You really should talk to an attorney before you do anything.

Also, before you help at all, make sure you can afford to. If you are bankrupt, you aren't really in the position to help with somebody else's financial problems.

[SadDebtor2]

Thank you for all the replies!

I haven't retained an attorney yet, so talking to one is not an option at this point.

I was just trying to help my partner, that's all. I know that I'm bankrupt and that I don't have any money, but I honestly don't mind helping him with the little I have.

[despritfreya]

ETA: You could loan him money and get a lien on the car. But, you need to make sure you perfect that lien (i.e., file it with the DMV) before you file BK.

This does not work because, when OP files bk OP will have to list the promissory note and security interest as an asset on Schedule B. If OP files a Chapter 7, the Trustee will simply step into OP's shoes and demand payment from the borrower and/or sell the right to the future payments (and the lien) to the highest bidder.

Best solution is not to give partner anything. Either spend the $ before filing, keeping track of where the funds go or find a way to exempt the money. Once the case is closed (as opposed to discharged) OP can do whatever OP wants.

Des.

[SadDebtor2]

Thank you again!

LadyInTheRed mentioned that "you can most likely exempt $5,000 cash using the wildcard under California's exemption system 2."

What if I end up with more than $5k right before filing?

What are some of the ways I can spend the money without being questioned about it?

[keepmine]

Here are Ca.'s exemptions.

http://www.thebankruptcysite.org/exemptions/california.html

Looks like under ystem 2, you can exempt over $25k of real or personal property if you don't have a home.
So, no need to spend money just to get rid of it.

[LadyInTheRed]

This does not work because, when OP files bk OP will have to list the promissory note and security interest as an asset on Schedule B. If OP files a Chapter 7, the Trustee will simply step into OP's shoes and demand payment from the borrower and/or sell the right to the future payments (and the lien) to the highest bidder.

Only if the OP can't exempt it, right? Based on the info posted so far, I am guessing the OP will be able to exempt a $5,000 loan using the California wildcard exemption which is currently over $28K if you don't need the homestead exemption.