Dallas Texas Bankruptcy: One of the more unfortunate results of filing bankruptcy occurs when a debtor has made payments to a family member to repay a debt prior to filing bankruptcy. Section 547 allows the Trustee to avoid any transfer of an interest of the debtor in property made within 90 days before the filing of the petition or up to one year prior to the filing if the transfer was made to an insider. This means that if a debtor borrows money from a family member and then repays a portion or all of the debt during the year before they file bankruptcy, the Trustee may require that the family member turn over those funds so that they can be disbursed to the creditors in the bankruptcy case. The purpose of this section is to prevent debtors from showing preference to creditors who are related to them. Section 547 attempts to provide equality among all of the unsecured creditors.
Setting aside these types of payment can create problems within families and anxiety for both the bankruptcy debtor and their family member. But keep in mind that there is no law or rule that says that a debtor cannot repay a debt to a family member after they complete their bankruptcy. Debtors who are concerned about how their family member will be affected by their bankruptcy case should reassure the affected party that they will be paid back.
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