One of the biggest mistakes a debtor can do, before filing for bankruptcy, is to repay debts owed to the debtors’ relatives or friends.
When a debtor files for bankruptcy a trustee is appointed in the case. The trustee’s job is similar to that of a referee, whereby the trustee reviews the debtor’s bankruptcy schedules and makes sure everything looks normal. The trustee also reviews the debtor’s tax returns, bank statements, and any other financial documents. The trustee will review your financial documents to see if you have made any illegal transfers.
Under the bankruptcy code, any transfer repaid to a relative or other “insider” within twelve (12) months prior to filing a bankruptcy case can be recovered by the Trustee in that case. That means that the Trustee can (and, depending on the amounts involved, will) sue that relative to recover the money or property repaid to them during that period. This is known as a “preferential transfer” and the bankruptcy statute is 11 U.S.C. 547. Furthermore the bankruptcy trustee can piggyback onto Florida state law and extend the fraudulent transfer period for an insider for upwards of four years.
Payments made to non-insiders (non-relatives) follow the same law, except the look back period for those transfers is only 90 days prior to the bankruptcy filing.
If you are thinking of filing for bankruptcy in South Florida, and would like to schedule a free consultation with a local bankruptcy attorney then please contact Ofer Shmucher at Shmucher Law, PL by calling 305.741.5553 or . We offer free consultations in any of our office locations including Boca Raton, Fort Lauderdale, Miami, and Plantation Florida.