Debt paid to family

April 6th, 2013 by Questions

I filed for bankruptcy and at the time I owed a home that was not valued at much. I sold the home and received only $15K due to liens on the home. I also owed money to a family member in the amount of $13K which I pay in full after. I am about to receive discharge. How do I should my trustee that I didn’t may an equity and I paid a debt to a family member that was present before I filed.

Posted from: Ontario


One Response to “Debt paid to family”

, A licensed trustee said:

You’ve got a couple of problems that you need to address IMMEDIATELY before the people that bought your house find out about this and make a great deal of trouble.

First, when you file for bankruptcy you lose the right to sell your house. Only your trustee has that right – for the benefit of your secured creditors. So, from a legal standpoint, the sale of your house may be invalid.

Second, by paying off one of your debts in full you have treated that creditor “better” than your other creditors – all of your other creditors have the right to demand the same treatment. That means they want to be paid in full too.

The normal solution is for your trustee to demand the money back from the creditor that you paid. If they won’t return it then the Court will make you pay an amount equal to or greater than what the creditor received.

Further, the Court may simply decide since you broke more than one rule of bankruptcy, maybe your bankruptcy should be cancelled and your debts returned to you in full.

If the Court, a creditor, or your trustee find out about this from some one other than you things will go very badly for you. If you come “clean” they should be able to sort it out without you being penalized…

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