Can I Pay Back Some of My Creditors Prior to Filing Bankruptcy?

Many people considering filing for Chapter 7 bankruptcy wonder whether it's acceptable to pay back certain creditors, especially those they want to maintain a relationship with, prior to filing? In most circumstances, those considering filing Chapter 7 bankruptcy should refrain from paying off creditors before filing. Bankruptcy laws discourage the unequal treatment of similarly situated creditors. This means that the debt owed to Credit Card Company A should not get paid prior to a bankruptcy filing while the debt owed to Credit Card Company B is discharged through the bankruptcy. Payments such as the one in the example made to Credit Card Company A are known as preferences and may even be avoidable. Avoidable preferences are payments or transfers of property an individual debtor made to an ordinary creditor (credit card companies, medical providers, merchants, etc.) within 90 days of filing bankruptcy or to an insider (relatives, friends, business associates, etc.) within one year of filing bankruptcy. For businesses filing for bankruptcy, the threshold amount is $5,850.00 as opposed to $600.00. If a preference is deemed "avoidable," the trustee can recover the money/property transferred to the preferred creditor and distribute the money as a pool to all of your unsecured creditors. This means that the intended creditors won't be able to keep the payments or property and the money and/or property will not be returned to you either. Therefore, it is in one's best interest to contact an experienced bankruptcy attorney when considering whether to pay off a debt prior to filing Chapter 7 bankruptcy. Douglas County Bankruptcy Lawyers are experienced bankruptcy attorneys that can advise you whether your payment or transfer of property to a creditor is an avoidable preference. Contact us today at 770-485-6620 to schedule your free bankruptcy consultation.