Just Like the Girl That Married Dear Old Dad
She gave you life. She gave you love and affection. She gave you security and protection. She gave you seven grand.
Yes, moms are by their very nature giving. And if you asked her, she would probably give you the shirt off her own back.
But what happens when your mom is also your creditor?
Sounds weird, right? Your mom is also your creditor. In the real world, we would never look at her that way. But bankruptcy is not the real world. In bankruptcy that is exactly who she is, along with any other family member or friend who loaned you money.
The Perfect Fan
“If I’m going to file for bankruptcy, there is no way I’m going to leave me mom high and dry! I’ll just pay her off before I file.”
This is actually one of the biggest mistakes people make when they file for bankruptcy. Paying off debt 90 days prior to filing can cause serious problems for your case, but when it comes to momma and the rest of your family and friends, the court will look back the entire year before you filed.
So if you pay off your mother less than 12 months before filing, the court considers this a “preference payment.” This means that the bankruptcy trustee can get every penny of that money back from you and then divide it among all of your creditors. If you don’t pay the money back to the trustee, your case will likely be dismissed.
Mother’s Little Helper
So don’t pay off mommy dearest before you file. If you already have, the safest thing you can do is have her return the money. This will effectively cancel the transaction. If that isn’t possible, then you need to wait until at least a year has passed before filing your case. This still doesn’t guarantee that you won’t have a preference payment issue, but it’s much safer than filing before too soon.