When you typically think of an insider, you automatically conjure images of an individual with secret insider information relating to shares of a company stock. Recent headlines in the media are rampant with Wall Street insider trades. However, an insider under the bankruptcy code is different.
If you are a family member, relative or even a close friend of the debtor and have received repayment for a loan prior to the debtor’s bankruptcy the trustee could consider your status as an insider. The reason is to prevent a debtor from making preferential payments at the expense of similarly situated creditors prior to a bankruptcy filing.
The bankruptcy trustee carefully reviews payments and transfers of property up to a year prior to your bankruptcy filing. If you are deemed to be an insider and made a substantial repayment to a family member than the trustee will seek to recover those funds. The trustee will sue the family member to recover those funds.
Thus, it is imperative that you do not pay a family member for a loan prior to filing bankruptcy. You must avoid preference and insider status under the bankruptcy code. You can always wait until after the bankruptcy is over to think about repayment.
If you have any questions regarding your bankruptcy, call an experienced Los Angeles Bankruptcy Attorney at Sky Law Group today!
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