Would this be considered preferential payment?

[LdiJ]

Would it still be preferential if the money was in installment payments to purchase an asset of some kind? I am just curious.

 

[quincy]

Perhaps despritfreya (a bankruptcy attorney) will post back.

 

[despritfreya]

Would it still be preferential if the money was in installment payments to purchase an asset of some kind? I am just curious.

Sorry, I missed this back in May.

Normally preferential payments cover unsecured debt. This is why you do not see Trustees going after the installment payments for secured vehicles or mortgages. So, if the security agreement for the purchase of "an asset of some kind" is 1) contemporaneous with the transaction and 2) valid under State law (properly recorded UCC lien, lien on title, etc.) then, in all likelihood there would not be a preference claim.

Des.

 

[socksornosocks]

So here's an update. Went to the 341 meeting, was truthful to the trustee about my uncle and a few days later he ended up getting a strongly worded letter to remit $6,000 by July 10th. He called the law firm that represents the trustee to see if he could negotiate a deal and they basically told him to piss off.

I'm waiting to speak to my lawyer on Monday to see what our options are at this point for that money.

From your guys(or girls) experience what would you say our options are. The 10th is coming up quick so I want to try and get a jump on this before the weekend ends. I told him worst case scenario to pay it and I'll find a way to pay him back but he seems to want to try and get it lowered (he can afford it but it's more out of principal since he doesnt think he should be considered preferential since every single creditor was being paid and up to date until the day I filed and he was being paid the correct proportion of the debt % that he was supposed to get as well as everyone else - he is about 20% of my debt and he was getting paid about 20% of all the payments to creditors I made on a monthly basis)

Thanks for the help again.

 

[justalayman]

Hang tight for despritfreya but if I recall, she stated you can swap out exempt assets for his debt, that is if you have that much to swap, if you choose to anyway. .

As to your uncles feelings: the law determines what is considered preferential. It’s not the trustee picking on him nor is it anything against him. It’s just that he is your uncle.


Des did refer to a defense for your uncle back in post 13. I haven’t reviewed it because honestly, much of this is over my head.

 

[despritfreya]

Too bad the Trustee did not approach you first. In my neck of the woods such is what would have happened.

Talk to your attorney and maybe get a referral for your Uncle. If he can show that the payments were "ordinary course", or at least raise a valid issue that they might have been "ordinary course" then that opens to door to a "compromise settlement". Your Uncle should have his own independent attorney but there is nothing wrong with raising this issue with your attny to see how you (and your Uncle) should proceed.

Des.

 

[LdiJ]

If this is at all helpful, back when I was the CFO for a small local corporation a trustee tried to take back payments for products that we had sold on a COD basis...calling those payments preferential. We responded with a strongly worded letter that we did not agree and that we weren't going to return the money. We never heard back anything from the trustee.

Its possible that if your uncle sends back his own strongly worded letter that he did not receive more than his prorated fair share of your debt repayment that the attorney might back off.

 

[socksornosocks]

Thanks for the great advice everyone heres the newest development.

I really dont want to put any burden on my uncle so i spoke with my lawyer last week and the plan is that he is going to propose to the trustee/trustees lawyer to settle for 4k if I can do it in a lump sum. I believe he is proposing that this week. In the meantime my uncle just called me today and said he got a summons from the Trustees lawyer saying he has 30 days to submit a motion or answer to the complaint asking for the 6k. What should I have him do while waiting for an answer about the lump sum proposal from me?

 

[despritfreya]

In the meantime my uncle just called me today and said he got a summons from the Trustees lawyer saying he has 30 days to submit a motion or answer to the complaint asking for the 6k. What should I have him do while waiting for an answer about the lump sum proposal from me?

Typical way we handle this but things could be different in your jurisdiction:

Once an offer is presented we ask the Trustee to give an "open extension to Answer the Complaint with a 10 day call". This can be done informally by email or formally by Motion. In essence one is asking for an extension to file an Answer beyond the 30 days allowed. If things don't pan out, the Trustee makes a demand and the defendant has 10 days to file an Answer or otherwise plead. Basically the parties are agreeing to a stand still until the matter is settled or it becomes apparent that there is no settlement possible. Run this past your attny.

Des.

 

[socksornosocks]

That makes sense. Let me ask you a simple worse case scenario question. My proposal is turned down and they want the full 6k. Can my uncle just pay it and everything goes away or is there another step now that a summons has been issued? He is willing to do that if necessary and we just figure out me paying him back I just want to make sure there is no judgement against him.

 

[despritfreya]

Can my uncle just pay it and everything goes away or is there another step now that a summons has been issued?

The Trustee wants $$$. If $$$ is paid the issue is over. Trustee should dismiss the adversary.

Des.

 

[socksornosocks]

Just got word from my lawyer that the trustee accepted the 4k deal so I'm going to be paying that.

Now I have no idea what to do on my uncle's side? Does the trustee just drop the adversary action or is there another step for him? My lawyer is kind of being a pain and refuses to give me any advice about what my uncle should do.

 

[despritfreya]

Just got word from my lawyer that the trustee accepted the 4k deal so I'm going to be paying that. Now I have no idea what to do on my uncle's side? Does the trustee just drop the adversary action or is there another step for him? My lawyer is kind of being a pain and refuses to give me any advice about what my uncle should do.

Gotta love settlement. No one wants to litigate - just too costly.

So, here is what should happen.

1. Trustee gives Uncle an open extension pending approval of the settlement between you and the bk estate. Your attny most likely can request an informal open extension by email but, again, that will depend upon local procedure. If your attny is not willing to do this your Uncle can make a phone call to the Trustee (or the Trustee's attny if there is one) and make the request. Make sure there is something in writing confirming the open extension

2. Trustee drafts a Stipulated Motion for Compromise Settlement under Rule 9019. That Motion gets filed with the Court and, depending upon local rules, will either be set for a Hearing or will be mailed to creditors on "negative notice". Negative notice tells creditors that they have 14 (or 21) days to object and if there are no objections the court will approve the Motion.

3. You pay the agreed amount.

4. Once the Motion is approved and you pay the agreed amount the Trustee will dismiss the adversary against your Uncle.

Verify the above with your attny and. . . I would like to add. . . "well played".

Des.

 

[socksornosocks]

Thanks Des, you've been awesome. I just glad I can get I can get out of this without any negative effects on my uncle. Crossing my fingers it all goes smooth.