It is true—when you file a bankruptcy, the Trustee that is assigned to the case possesses many powers, and one of them is that he or she can undue payments made to creditors within ninety days prior to the bankruptcy filing (if they are over $600 aggregate). If you have been paying back a relative, the Trustee can go back a full year! That means that if you know you are going to file, but still continue to pay your creditors, you are potentially just wasting all that money. That being said, there is an even better reason:
Without exception, the money you would be paying to the creditors is better kept in your own pockets and used to pay for things like: your mortgage, your rent, your auto loan, groceries and other necessities, or your bankruptcy attorney. Using the funds to pay for those items is always going to be more beneficial than sending it off to creditors and potentially having it recovered by the Trustee anyway. You might be asking, “Well, what if I pay for those things, but still have money left over?” If that is the case:
In a large percentage of bankruptcy cases, you are actually able to have a decent amount of money in your bank account at the time of filing and keep it protected from the creditors (if you are not a homeowner, it could be up to over $10,000!). This is, of course, determined on a case by case basis, but it is something you definitely should discuss with one of our attorneys.
If you plan to file and you have stopped making the payments on the cards, you should definitely stop using them. I know this might sound scary, but if you stop paying them, the hope is that you will now have enough available funds so you can also stop using them. Either way, it is important that you stop using the cards once you decide you are filing bankruptcy because you do not want the creditors to be able to claim that you were using the cards but not intending to pay.
When the time is right and you are ready, please do not hesitate to reach out to Kain & Scott at www.kainscott.com for a free consultation. When you do, you will be glad that you did!