| Don't lose sight of the fact that your statement of financial affairs will have to list all payments aggregating more than $600 to an individual creditor within the past 90 days. The trustee is entitled to recover such preferential payments, and you would probably not be able to exempt the recovered funds because the payments themselves would appear to be voluntary.
If your 401(k) plan is ERISA qualified, it would not be part of your estate. Thus, borrowing from it (and thereby reducing the value of an asset that the trustee couldn't touch) to pay a dischargeable debt may not be smart.
On top of all that, merely borrowing money from a payday lender on the eve of bankruptcy is not fraudulent if you had the intention to repay the loan according to its terms. This is not like luxury purchases or cash advances on a credit card within 60 days, where the code reverses the normal burden of proof -- the lender would have to prove fraud, and that can be hard to do.
Please do yourself the favor of discussing your plans with your bankruptcy attorney before you carry them out. A simple ch. 7 should cost you $1,000 or less plus the $209 filing fee, and you might save $3,000 right off the bat -- maybe more if the attorney is able to identify some other exemption-planning moves that you could make. Of course, your own attorney might have completely different advice based on knowledge of all the facts of your case.
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Walter Oney, Attorney at Law (Massachusetts)
Nothing in this message should be construed as legal advice or as establishing an attorney-client relationship.
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06-02-2004, 09:50 PM
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