topic Re: Paying a creditor more than $600 for the minimum monthly payment? in Bankruptcy

Paying a creditor more than $600 for the minimum monthly payment?

twono — Fri, 26 Apr 2019 17:00:34 GMT

I've heard/read/or was told, not to pay any singe creditor more than $600....

I have an unsecured loan with a monthly payment more than $600. Is it OK to pay a creditor the minimum monthly due even if it's over $600?

I'm paying ALL my minimum monthly payments to creditors and keeping my reports clean before I file soon.

Re: Paying a creditor more than $600 for the minimum monthly payment?

FireMedic1 — Fri, 26 Apr 2019 22:14:38 GMT

When the bankruptcy trustee reviews your bankruptcy paperwork, one of the things scrutinized will be asset transfers. A transfer can include a monetary payment or a transfer of property, such as a car or real estate.

Whether the trustee will void a monetary payment will depend on:

the creditor’s relationship to you how much you paid the creditor, and when you made the payment.

Regular creditor payments. If a creditor is not an insider, the trustee can’t undo the transaction unless you paid the creditor more than $600 within 90 days before your bankruptcy filing; however, actual practices can vary depending on the court and trustee.

Re: Paying a creditor more than $600 for the minimum monthly payment?

MyDataMyChoice — Fri, 26 Apr 2019 23:41:11 GMT

If you can make all your minimum payments...

Have you tried a Hardship program to stop interest?

If you are filing BK... why pay these loans at all? It'll be AT LEAST 6 months before they can sue anyway

I was going to do the same... not have any lates... file BK... doesnt matter... save your money

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sat, 27 Apr 2019 00:21:58 GMT

@MyDataMyChoice wrote:
If you can make all your minimum payments...
Have you tried a Hardship program to stop interest?

If you are filing BK... why pay these loans at all? It'll be AT LEAST 6 months before they can sue anyway

I was going to do the same... not have any lates... file BK... doesnt matter... save your money

I can't make any payments after this month.

If you have 30+ lates before you file BK, those lates in addition to the BK will be a huge boat anchor in the rebuilding process post BK, correct? I"ve read that going into BK with clean reports will be very beneficial post BK/discharge.

You say 'save your cash'. How can you do that? The money is in the bank. I can't withdrawal and put it away? That is a big no no from my understanding. I will be producing bank statements and what not. Surely there can't be any large cash withdrawals on bank statements?

I'm not doing anything that will cause a trustee to think twice about my BK filing.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Fri, 26 Apr 2019 23:58:09 GMT

@FireMedic1 wrote:
When the bankruptcy trustee reviews your bankruptcy paperwork, one of the things scrutinized will be asset transfers. A transfer can include a monetary payment or a transfer of property, such as a car or real estate.
Whether the trustee will void a monetary payment will depend on:
the creditor’s relationship to you how much you paid the creditor, and when you made the payment.

Regular creditor payments. If a creditor is not an insider, the trustee can’t undo the transaction unless you paid the creditor more than $600 within 90 days before your bankruptcy filing; however, actual practices can vary depending on the court and trustee.

Soooo, if i make a payment 8% more than the $600 limit, chances are the trustee may not care? It is just the minimum installment loan payment. Not paying any extra to anybody.

Re: Paying a creditor more than $600 for the minimum monthly payment?

MyDataMyChoice — Sat, 27 Apr 2019 00:26:44 GMT

depends on your state... in my state you can have $6,500 of CASH on hand as a wildcard.... if its from income... you can keep it.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sat, 27 Apr 2019 04:48:52 GMT

@MyDataMyChoice wrote:
depends on your state... in my state you can have $6,500 of CASH on hand as a wildcard.... if its from income... you can keep it.

I was told $500 max cash on hand and to not have more than $100 showing in a bank account the day of filing.

So i feel like i have no choice but TO pay creditors and empty the bank account before i file.

Re: Paying a creditor more than $600 for the minimum monthly payment?

despritfreya — Sat, 27 Apr 2019 12:32:40 GMT

You should be asking a local attny what you can do with funds you have prior to filing bk.

Depending upon your allowed exemptions, some or all may be protected and not need to be spent before you file. The funds that do need to be spent can be spent prior to filing on necessities with you keeping detailed records. An attny in your area can guide you as to what is considered a “necessity”.

As to preferences, and assuming your are a “consumer” filer, if you pay any particular creditor more than $600.00 within 90 days prior to filing, your Chapter 7 Trustee WILL get the money back. If that creditor is a relative (insider) the 90 days extends to 1 year.

The reality is that you are over your head in debt. Throwing away money that you probably need to survive, just to, in your mind, make it a tiny bit easier to get back into debt after filing bk is, IMHO, dumb.

Des.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sat, 27 Apr 2019 15:45:36 GMT

@despritfreya wrote:
You should be asking a local attny what you can do with funds you have prior to filing bk.

Depending upon your allowed exemptions, some or all may be protected and not need to be spent before you file. The funds that do need to be spent can be spent prior to filing on necessities with you keeping detailed records. An attny in your area can guide you as to what is considered a “necessity”.

As to preferences, and assuming your are a “consumer” filer, if you pay any particular creditor more than $600.00 within 90 days prior to filing, your Chapter 7 Trustee WILL get the money back. If that creditor is a relative (insider) the 90 days extends to 1 year.

The reality is that you are over your head in debt. Throwing away money that you probably need to survive, just to, in your mind, make it a tiny bit easier to get back into debt after filing bk is, IMHO, dumb.

Des.

Thanks for the reply. I have an attorney, but i wasn't able to make contact with him yesterday.

I'm not picking and choosing to pay 'certain' creditors....The plan is to pay every single bank, loan, CU...the minimum monthly due. It just so happens that '1' of my unsecured loans i have with a financial institution is more than $600. So as long as every creditor is getting their monthy payment, why would the trustee care? I"m not 'choosing' or 'showing favor' to send a creditor more than the next creditor.

Doesn't make sense that the trustee would repossess a single $625 minimum monthly payment that was made to a creditor and then redistribute it among 30+ creditors. The trustee would then be in fact showing 'favor' towards all the other creditors by essentially making the bank that was paid $625, to pay the 30 other creditors.

$500 cash on hand is the limit in my state. So you're saying i should go out and buy $8000 worth of groceries, gas cards, cleaning supplies and dog food? Those would all be considered necessities, right? Or pay 14 yrs worth of vehicle insurance premiums?

What makes you think i'm looking to get back in debt post-BK? Getting a mortgage would be considered going into debt so i suppose you're correct in that sense. Home ownership is my life goal post BK.

Here are the exemptions in my state.

Homestead

$145,425 of equity in one parcel of real or personal property (home, manufactured, or mobile home) that you or your dependent uses as a residence

Personal Property

$500 of cash on hand or deposit

$4,000 of value in one motor vehicle

$1,700 of value in jewelry

Interest in one burial lot

$25,175 of value in a personal injury award received within 12 months of bankruptcy filing

Wages

75% of wages

Pensions

Private pensions

Tax-exempt retirement accounts, including 401(k), 403(b), and profit-sharing plans

IRAS and Roth IRA

State teacher retirement system

Public Benefits

Crime victim's compensation received during 12 months before filing

Disability assistance payments

Earned income tax credit and child tax credit

Unemployment compensation benefits

Workers’ compensation benefits

Wildcard

$1,325 of value in any property

Support

Spousal or child support, to the extent reasonably necessary for support

Tools of the Trade

$2,550 of value in implements, books, and tools of your trade, occupation, or business

Miscellaneous

529 savings plans

$5,000 in benevolent society death benefits

Re: Paying a creditor more than $600 for the minimum monthly payment?

despritfreya — Sat, 27 Apr 2019 18:09:26 GMT

@twono

If, as you say, you have $8k sitting in the bank why would you file now? Why would you not simply live off the funds to your greatest benefit and file when the funds are legitimately dissipated? These are issues you discuss with a qualified attny before filing. If your qualified attny advises paying creditors that will be discharged, as opposed to spending the funds over time to maximize a benefit to you, then you take his/her advice to heart.

The Chapter 7 Trustee’s job is to find assets. A preferential payment is an asset and it does not matter if the preference is $600.01 or $6,000.01. The funds are subject to clawback by the Trustee. The decision to seek the clawback is that of the Trustee’s. He/she may or may not deem the amount he/she can recover as “insignificant”. The defense of “ordinary course payments” is a defense raised by the creditor, not the debtor. Unfortunately, you have no say as it relates to the Trustee’s avoiding powers and your thought process as to what a Trustee should or should not do is not at issue. The Trustee has a job to do and, while doing that job, can make a few bucks to line his/her pocket. Having said this, if the only asset the Trustee can get is worth $600.01 then, in all likelihood, he/she will elect not to administer the asset since the cost of doing so may not be justified.

I am glad you have an attny. You need to communicate with him/her for the best advice on how to proceed.

Des.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sat, 27 Apr 2019 19:56:42 GMT

@despritfreya wrote:
@twono

If, as you say, you have $8k sitting in the bank why would you file now? Why would you not simply live off the funds to your greatest benefit and file when the funds are legitimately dissipated? These are issues you discuss with a qualified attny before filing. If your qualified attny advises paying creditors that will be discharged, as opposed to spending the funds over time to maximize a benefit to you, then you take his/her advice to heart.

The Chapter 7 Trustee’s job is to find assets. A preferential payment is an asset and it does not matter if the preference is $600.01 or $6,000.01. The funds are subject to clawback by the Trustee. The decision to seek the clawback is that of the Trustee’s. He/she may or may not deem the amount he/she can recover as “insignificant”. The defense of “ordinary course payments” is a defense raised by the creditor, not the debtor. Unfortunately, you have no say as it relates to the Trustee’s avoiding powers and your thought process as to what a Trustee should or should not do is not at issue. The Trustee has a job to do and, while doing that job, can make a few bucks to line his/her pocket. Having said this, if the only asset the Trustee can get is worth $600.01 then, in all likelihood, he/she will elect not to administer the asset since the cost of doing so may not be justified.

I am glad you have an attny. You need to communicate with him/her for the best advice on how to proceed.

Des.

Filing for me, is a matter of timing. Last 6 mos income and putting 90 days from cash advances, is putting my Ch. 7 filing in a narrow 2 wk window. If i don't file at a specific date, i will not pass the median income test. A vicious cycle of borrowed debt to pay debt is the crux of the situation. Money that is in the bank is borrowed debt.

I met with 6 attorneys....They all said to stop paying creditors. But, when i explained to them that i am currently up to date on bills, i have clean reports, no inquiries, no new accts in over 2 yrs, etc, and that having 'clean' reports going into BK will help the inevitabe post BK rebuilding process, they understood my desire to stay current up til filing. At that point, they ALL would shrug their shoulders and say i could pay them if i wanted to if that's my concern. Most attorneys seem to know very little about 'credit' per se. Also, most people filing are already late, getting collections, garnishments, sued, etc...so in those situations it would make perfect sense to NOT pay anymore creditors (unsecured debt).

Not sure how a minimum monthly payment to each creditor can be perceived as 'preferential'? If they're ALL getting my monthly obligation, then i'm not 'preferring' a creditor over another.

Des, i think you're missing the point that i'm paying ALL creditors their monthly payment. It just so happens 1 of them is over $600. So maybe i'll just send them $599.99? When i file, none of the creditors will be legitimately able to hit me with 30 day lates. Of course they may very well do that, but i'll cross that dispute process bridge when i come to it.

My attorney is arguably the best BK firm/lawyer in my big city. $4000 for Ch. 7. Ouch.

2 of the 6 attorneys i spoke with are also trustees. Go figure. Including mine.

I appreciate your insight @Des

Re: Paying a creditor more than $600 for the minimum monthly payment?

FireMedic1 — Sat, 27 Apr 2019 23:56:59 GMT

The payment for that loan is set at $600. So that would be a normal monthly payment for an account you have. No favortism. I do not agree with folks that say quit paying. Bunch of garbage. You cant afford the debt you have and want to file. So be it. Take the 8 grand and give it back to whoever you got it from and leave some to live on and make the payments on time and stay under the amount for filing. Its bad enough we have to file. But no one should stop manking payments (min) and aviod late payments I say. Lates are there for 7 yrs and the BK for 10. Why get double slammed. I kept my truck and never had a late and reaffirmed. It helped a whole heck of a lot once I started to rebuild. I had no lates. But thats JMO and BK Lawyers dont know FICO.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sun, 28 Apr 2019 00:49:51 GMT

@FireMedic1 wrote:
The payment for that loan is set at $600. So that would be a normal monthly payment for an account you have. No favortism. I do not agree with folks that say quit paying. Bunch of garbage. You cant afford the debt you have and want to file. So be it. Take the 8 grand and give it back to whoever you got it from and leave some to live on and make the payments on time and stay under the amount for filing. Its bad enough we have to file. But no one should stop manking payments (min) and aviod late payments I say. Lates are there for 7 yrs and the BK for 10. Why get double slammed. I kept my truck and never had a late and reaffirmed. It helped a whole heck of a lot once I started to rebuild. I had no lates. But thats JMO and BK Lawyers dont know FICO.

Thanks for re-affirming what i think i should be doing as far as making payments.

On that 1 loan payment, the installment loan payment is just over $600, by about 8%, without getting too specific.

I'm going to pay it. If the trustee wants to go through the trouble of taking it back, more power to them.

Thanks again.

Re: Paying a creditor more than $600 for the minimum monthly payment?

FireMedic1 — Sun, 28 Apr 2019 08:26:37 GMT

@twono wrote:
@FireMedic1 wrote:
The payment for that loan is set at $600. So that would be a normal monthly payment for an account you have. No favortism. I do not agree with folks that say quit paying. Bunch of garbage. You cant afford the debt you have and want to file. So be it. Take the 8 grand and give it back to whoever you got it from and leave some to live on and make the payments on time and stay under the amount for filing. Its bad enough we have to file. But no one should stop manking payments (min) and aviod late payments I say. Lates are there for 7 yrs and the BK for 10. Why get double slammed. I kept my truck and never had a late and reaffirmed. It helped a whole heck of a lot once I started to rebuild. I had no lates. But thats JMO and BK Lawyers dont know FICO.
Thanks for re-affirming what i think i should be doing as far as making payments.

On that 1 loan payment, the installment loan payment is just over $600, by about 8%, without getting too specific.
I'm going to pay it. If the trustee wants to go through the trouble of taking it back, more power to them.

Thanks again.

Oops. I did have 1 30 day late 3yrs old when I filed. Once you see the BK filed. Then stop payments ASAP. Good Luck!

Re: Paying a creditor more than $600 for the minimum monthly payment?

despritfreya — Sun, 28 Apr 2019 12:12:21 GMT

@twono wrote: On that 1 loan payment, the installment loan payment is just over $600, by about 8%, without getting too specific. I'm going to pay it. If the trustee wants to go through the trouble of taking it back, more power to them.

Assuming the loan payment is $648/month (not $216), just wanted to point out that the preference is not $648 in your case. It will be $1,944 if you make the "normal" monthly payment over the 90 days prior to filing. The Trustee will earn $486 off of that amount for simply writing a two paragraph demand letter therefore he/she will get the money back. I do agree that if the total paid in the 90 days is just $648, and there are no other assets to administer, the Trustee is not likely to do anything. But. . . again. . . this is not your issue.

Des.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sun, 28 Apr 2019 13:02:10 GMT

@despritfreya wrote:
@twono wrote: On that 1 loan payment, the installment loan payment is just over $600, by about 8%, without getting too specific. I'm going to pay it. If the trustee wants to go through the trouble of taking it back, more power to them.
Assuming the loan payment is $648/month (not $216), just wanted to point out that the preference is not $648 in your case. It will be $1,944 if you make the "normal" monthly payment over the 90 days prior to filing. The Trustee will earn $486 off of that amount for simply writing a two paragraph demand letter therefore he/she will get the money back. I do agree that if the total paid in the 90 days is just $648, and there are no other assets to administer, the Trustee is not likely to do anything. But. . . again. . . this is not your issue.

Des.

If the $600 payment is a total amount over the past 90 days, then i'll have 25 creditors that i will have made more than $600 in minimum monthly due payments. I have many many $200+ minimum monthly payments.

If the trustee is working on behalf of the creditors, why is it in their power to take a creditors' rightful minimum monthly payment and distribute it to other creditors whose minimum monthly payment is less than theirs'?

It is what it is i guess. I'm making the payments. I'll let the trustee/creditors/court/attorneys hash it out. I was given the 'go ahead' by my attorney. Maybe he knows something that i don't.

Re: Paying a creditor more than $600 for the minimum monthly payment?

despritfreya — Sun, 28 Apr 2019 14:26:59 GMT

I realize we have hashed this thread to death but I do want to explain a bit further. You asked why the Trustee would take back the funds if he/she is working on behalf of the creditors. This is a good question that deserves an answer.

Pursuant to 11 USC 547 the trustee may avoid. . .

any transfer of an interest of the debtor in property—

1) to or for the benefit of a creditor;

2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

3) made while the debtor was insolvent;

4) made—

A) on or within 90 days before the date of the filing of the petition; or

B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider and;

5) that enables such creditor to receive more than such creditor would receive if—

A) the case were a case under chapter 7 of this title;

B) the transfer had not been made; and

C) such creditor received payment of such debt to the extent provided by the provisions of this title.

This provision generally applies to unsecured (non-priority) creditors although I have seen Trustees recover from secured creditors under specific circumstances. In "English", the Trustee can recover the money because the payment you made would exceed the amount that would have been distributed to that same creditor by the Trustee.

In a Chapter 7 the first person to get paid is the Trustee. The second is the Trustee's attny (if he/she hires one). After that, if the debtor owes domestic support it goes to that creditor. If the debtor owes taxes it then goes to pay taxes. The last one to be paid (if there is any money left) is a general unsecured creditor. Unsecured creditors who file timely claims get paid on a pro rata basis. The larger the claim the higher the percentage that gets paid out of the available pot.

I hope that helps explain why a Trustee will recover a preference.

Des.

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Sun, 28 Apr 2019 15:21:43 GMT

@despritfreya wrote:
I realize we have hashed this thread to death but I do want to explain a bit further. You asked why the Trustee would take back the funds if he/she is working on behalf of the creditors. This is a good question that deserves an answer.

Pursuant to 11 USC 547 the trustee may avoid. . .

any transfer of an interest of the debtor in property—
1) to or for the benefit of a creditor;
2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
3) made while the debtor was insolvent;
4) made—
A) on or within 90 days before the date of the filing of the petition; or
B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider and;
5) that enables such creditor to receive more than such creditor would receive if—
A) the case were a case under chapter 7 of this title;
B) the transfer had not been made; and
C) such creditor received payment of such debt to the extent provided by the provisions of this title.

This provision generally applies to unsecured (non-priority) creditors although I have seen Trustees recover from secured creditors under specific circumstances. In "English", the Trustee can recover the money because the payment you made would exceed the amount that would have been distributed to that same creditor by the Trustee.

In a Chapter 7 the first person to get paid is the Trustee. The second is the Trustee's attny (if he/she hires one). After that, if the debtor owes domestic support it goes to that creditor. If the debtor owes taxes it then goes to pay taxes. The last one to be paid (if there is any money left) is a general unsecured creditor. Unsecured creditors who file timely claims get paid on a pro rata basis. The larger the claim the higher the percentage that gets paid out of the available pot.

I hope that helps explain why a Trustee will recover a preference.

Des.

I'm stuck on the last word in your last sentence..."I hope that helps explain why a Trustee will recover a "PREFERENCE."

I'm not 'preferring' to pay one creditor over another. I'm paying all of them the minimum monthly amount due to each of them. I'm meeting my contractural agreement with the creditors for now. If i were paying a select group of creditors, then it would make sense to me. But since i'm not, i don't get it. I'm not that dense of a guy believe it or not. lol.

I don't owe support, i don't owe individuals, i do owe taxes....Having said that, part of me wants to fail the Ch. 7 means test, and get forced into a Ch. 13/36 mo repayment plan. That way i could keep what little assets i have and repay the tax debt since it gets priority in a repayment plan. I don't own a home, no property, no boats...only 2 vehicles valued under $5000 total. I do have secured loans for luxury item.

Re: Paying a creditor more than $600 for the minimum monthly payment?

MyDataMyChoice — Mon, 29 Apr 2019 02:06:49 GMT

what state are you in?

do you normally get a tax refund? married? kids? (# of household)

For the taxes... you can do an Offer in Compromise... or pmt plan

If they are INCOME taxes... they may be able to be discharged...

CH7 is almost always better... unless its to save a home your living in due to pending foreclosure etc...

Re: Paying a creditor more than $600 for the minimum monthly payment?

twono — Mon, 29 Apr 2019 08:36:20 GMT

@MyDataMyChoice wrote:

what state are you in?

do you normally get a tax refund? married? kids? (# of household)

For the taxes... you can do an Offer in Compromise... or pmt plan

If they are INCOME taxes... they may be able to be discharged...

CH7 is almost always better... unless its to save a home your living in due to pending foreclosure etc...

Single, 0 dependents, 1 in household, back income taxes. Usually get a small $1000 refund each year.

Attorney says taxes are definitely not dischargeable.

My attorney spent 95% of our time discussing Ch. 7.....the runner-up attorney that i did not go with, spent 95% of our time discussing Ch. 13/60 mo repayment plan. I think attorney #2 was thinking about a bigger payday for himself by doing a Ch 13. Although my Ch 7 attorney is $4000.