Large amount of money before filing chapter 7

[Anonymous]

The question is: if someone has $20,000 saved up for a credit card settlement, but then decides to file chapter 7 bankruptcy instead, can they 1) apply that $20k toward a mortgage payment 100 days before filing? 2) apply that $20k toward a retirement account 100 days before filing or 3) have to give that money to unsecured creditors? My guess is #3 is the correct and safest option, but #1 and #2 don't violate the 90 day preference payment law....what do you think?

[Jnbmom]

Trying to intentially "hide"  or more money around prior to filing BK, I would think would be a very bad idea.

[Anonymous]

I agree it's a bad idea...but as long as you don't conceal the checking account you made the large payment from, it's not "hiding" or concealing assetts. The trustee is likely to closely review all transactions in the past 6 months on checkings/savings/money market accounts, etc.....

[Jnbmom]

@Anonymous   True maybe not hiding, but definitely not a smart move by any means.

[Anonymous]

I totally agree. I am thinking, rather than a preferential payment issue, in this context the discharge would be contested on the grounds that a "fraudulent conveyance" occurred. The person filing bankruptcy attempted to "remove" a substantial amount of cash (property) to gain an unfair advantage over its creditors. I imagine a $1,000, $3,000 or even a $5,000 mortgage payment 100 days ahead of filing may not be challenged ina bk filing, but a $20,000 definitely would be contested. I think it's easy to suggest fraud occurred. I am not sure when the amounts starts to get challenged - perhaps the *amount* that is challenged is when the cash would be otherwise be non-exempt.

[despritfreya]

Sit down with a good attny before you do anything.  There is nothing wrong with pre bankruptcy planning so long as it is done correctly.  No one on the Internet is going to be able to tell you what you should or should not do with $20k.

Des.