Tuesday, January 4, 2022

Thinking about bankruptcy? This is not the time to pay back your family or friends...

Times are tough ... inflation is raging, stimulus ended, and interest rates about to increase. Many people have not fared well through the Covid-19 pandemic. Also, some people relied on family and friends for help to make ends meet. The natural desire is to pay back friends and family first.

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net
If a person does so, it could cause problems later if that person needs to file for bankruptcy protection. Bankruptcy laws do not allow a debtor to treat one unsecure creditor different from another. Believe it or not, according to the law, owing a family member money is the same as owing a credit card company money. You cannot pay one creditor (your family) over another (credit card company). That can be called a "preference."

It may also be considered a "fraudulent conveyance." When you pay money to a friend or family member, an "insider", to avoid paying another creditor like a credit card company, a court could find this a "fraudulent conveyance." As a result, a Trustee can look to recover the payments from your family and friends. Don't get caught in this situation; talk to a bankruptcy attorney.

If you want assistance, legal representation, or just want to know more about Mark Medvesky or our firm of Wells, Hoffman, Holloway & Medvesky LLP, check out our website at www.whhmlaw.com.

#bankruptcy #Chapter7 #Chapter13 #MontgomeryCounty #lawfirm #BucksCounty #Pennsylvania

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