Private debt and cash advances
My father owes approximately 30k to a private individual who consolidated several other debts for him, as well as a 23K bank loan secured on his partner`s home, a 14k car loan, and 6k in credit card debt. He has recently been diagnosed with cancer and is struggling to manage financially on a reduced income. He is considering bankruptcy but does not want to let down the individual who his financing his debt, or his partner. He has talked about taking cash advances on credit cards to pay off these existing loans and then declaring bankruptcy somewhere down the road. Would this be fraud? What would you recommend in this situation?
Posted from: Ontario
This would be a very bad idea. Anytime you are involved in trying to plan a bankruptcy and protect interests of one creditor over the other you are at a risk. If your father does this it is considered a fraudulent preference, the result is that he will not be eligible for an automatic discharge, he will have to go to court and the court could very likely rule that all of the money that was paid to this individual be paid back to the trustee and distributed among the other creditors. Additionally there would likely be a significant penalty for doing something so clearly inappropriate.