Can I Pay Off Certain Debts To People I Like Before Filing Bankruptcy?
If you need a Portland bankruptcy attorney, you are not alone. Bankruptcy has become extremely common in recent years with the downturn of the economy, especially chapter 7 bankruptcy. Many, many people do not understand whether they can keep their property in bankruptcy or whether they can somehow get rid of it in order to avoid having to turn it over to the bankruptcy trustee. A Portland bankruptcy lawyer can help you sort through many of these issues to insure that you take the best possible actions in your decision to file for bankruptcy and the subsequent case. A bankruptcy attorney Portland Oregon practitioner can review your financials, advise you on whether bankruptcy makes good sense for your case, file the necessary paperwork, and represent you in court. With regards to whether you can pay certain debts before bankurptcy, the trustee can avoid certain transfers of property that happened before bankruptcy. This is a highly complex area of the law and leads many potential bankruptcy filers into trouble.
A bankruptcy trustee can avoid debtors’ prebankruptcy property transfers under three separate legal provisions of the Bankruptcy Code:
- Section 544 – under the “strong arm clause,” transfers that could be avoided under state law are also avoidable under bankruptcy law. This provision prevents undisclosed transfers, unperfected security interests and secret liens from depleting your bankruptcy estate. For instance, under many state laws, an individual must “perfect” a security interest in property or fail to receive secured creditor status. The bankruptcy trustee has the power to enforce such state laws.
- Section 547(b) – a bankruptcy trustee can avoid two different types of “preferential” transfers that a debtor makes. First, the bankruptcy trustee can avoid any transfer to an “insider” that took place within one year before filing bankruptcy. . Second, any transfer that the debtor makes to a creditor within the 90 days before he or she files bankruptcy can be avoided if the creditor receiving the transfer received more than other creditors in the same class. This means you cannot pay off your debts to your doctor that you like and leave the credit card company that you hate holding the bag. If both are considered nonpriority unsecured creditors (i.e., in the same class), the bankruptcy trustee could take that payment back and split it evenly between all creditors in that class.
- Section 548(a)(1) – a bankruptcy trustee may avoid any transfer of real or personal property made by a debtor within one year of bankruptcy as fraudulent, if the transfer was made with actual intent to hinder, delay or defraud creditors or if the debtor received less than a reasonably equivalent value in exchange for the transfer. What does this mean? You can’t sell your prized ’67 Mustang to your cousin for $1 and file bankruptcy a month later, hoping to avoid losing the vehicle.
This area of the law is highly litigated and you should therefore speak to an attorney if you wish to have your particular case reviewed. A Portland bankruptcy attorney is never more than a phone call away and many will give you a free consultation to help you explore your options.