Knowing what an “insider” is when filing personal bankruptcy is essential when preparing the bankruptcy petition. Transactions with insiders during the year prior to filing the petition get special scrutiny. Such transactions, particularly the payback of loans, may be set aside by the bankruptcy court and result in a relative of yours having to pay any amounts you paid to him or her to the bankruptcy trustee to pay other creditors.
The Bankruptcy Code defines an insider as, “any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control.”
When we prepare your petition, we’ll ask you about any transactions you had with family members in the last year. If you’ve repaid any loans from family members during that time, you should be prepared to pay that same amount to the bankruptcy trustee. If you don’t pay it, he’ll go after which ever family member you paid. If you only paid them a small amount (usually less than $500), then he probably won’t be interested. If you paid back a large amount, we might recommend that you wait to file until after the one year look back period has passed to avoid having to pay the trustee anything.
If you have questions about loans from family members and how bankruptcy will affect them, please come in for a free, no-obligation consultation with an experienced lawyer to learn more. You can make an appointment by calling 303.331.3403 or by using our online scheduling system.