preferential transfer in bankruptcy

If you are considering filing for bankruptcy, you should consult with a Tampa bankruptcy lawyer as soon as possible. Without competent legal advice you may be unaware of bankruptcy laws that prohibit you from making specified purchases, payments, or transfers of property prior to filing for bankruptcy. Under bankruptcy law, the Trustee has the right to bring an action to avoid certain transfers that occurred prior to the bankruptcy filing, such as a preferential transfer in bankruptcy. If the Trustee discovers there was a preferential transfer in bankruptcy it can have grave consequences for your Chapter 13 or Chapter 7 bankruptcy.

What is a Preferential Transfer in Bankruptcy

One of the possible grounds for a trustee to avoid a pre-bankruptcy transfer is a preferential transfer in bankruptcy by the debtor. A preferential transfer enables a creditor to receive payment of a greater percentage of his claim than he would have received in bankruptcy if the transfer had not been made. For example, a debtor borrowers money from a family member and pays that debt in full within 90 days of filing for bankruptcy while not paying other creditors.  In order to avoid a preferential transfer, the Trustee must prove all of the following:

  1. The debtor transferred property to or for the benefit of a creditor
  2. A transfer was made for or on account of a debt that was owed prior to the transfer
  3. The transfer was made while the debtor was insolvent
  4. A transfer was made within 90 days of filing for bankruptcy
  5. The transfer enabled the creditor to receive more than he would have received in a Chapter 7 bankruptcy if the transfer had not occurred

What Qualifies as a Preferential Transfer in Bankruptcy

The law regarding a preferential transfer in bankruptcy is very broad and includes many different types of transfers. The policy behind the law is to enhance the bankruptcy estate for the benefit of creditors and to encourage a proportional distribution to creditors. See Union Bank v. Wolas, 502 U.S. 151. Actions taken by a debtor to hide, conceal, or transfer assets can be seen as attempting to defraud creditors/ the estate and may be treated as a preferential transfer in Bankruptcy. You should contact a bankruptcy law firm in Tampa for more advice on planning for bankruptcy if you think it may be something on the horizon.

Defenses to a Preferential Transfer in Bankruptcy

If the trustee fails to prove all five of the above requirements the transfer will not be deemed a preferential transfer in bankruptcy. However, even if the trustee does successfully prove all of the required elements there are still defenses. If a debtor is successful in proving a valid defense the transfer will not be avoided by the trustee and will not be deemed an invalid preferential transfer in bankruptcy. Defenses to preferential transfers include but are not limited to:

  • The transfer was made in the ordinary course of business
  • The transfer was substantially contemporaneous with the origination of the debt
  • A transfer that creates a security interest in property acquired by the debtor to the extent such security interest secures new value
  • Earmarking – a third party or a guarantor makes a payment or provides funds to the debtor “earmarked” for payment on a particular debt.
  • The transfer that was payment of a domestic support obligation.
  • The debtor’s debts are primarily consumer debts and the aggregate value of all property affected by the transfer is less than $600

Bankruptcy Law Firm in Tampa

Florida Law Advisers, P.A. is dedicated to providing effective representation, individual attention and affordable fees to our bankruptcy clients. Florida Law Advisers, is a customer-service oriented firm with a strong reputation for providing personalized attention and dedicated legal counsel to help avoid pitfalls, such as a preferential transfer in bankruptcy. Regardless of whether you need help with Chapter 13, Chapter 7, or other forms of debt relief, our professional legal team of bankruptcy lawyers in Tampa will provide you with competent legal advice you can trust.  Call us now at 800 990 7763 to speak with a bankruptcy lawyer in Tampa at our firm.

 

eliminate a 2nd mortgage

Lien stripping is a very useful tool for borrowers who need to eliminate a 2nd mortgage. Lien stripping may allow you to eliminate a 2nd or 3rd mortgage on your home and/ or reduce your car loan to the car’s current market value. Stripped liens will receive the same treatment as all your other unsecured debts (i.e. credit cards) in bankruptcy.  These debts generally receive nothing or a small amount and get discharged at the completion of your bankruptcy.  Further, after the discharge your lender for the stripped lien will be required to remove its lien from the collateral. For more information on how to eliminate a 2nd mortgage contact a bankruptcy lawyer in Tampa to schedule a consultation.

Eliminate a 2nd Mortgage with Lien Stripping

Chapter 7 may allow you to eliminate a 2nd mortgage with lien stripping. Lien stripping to eliminate a 2nd mortgage is not allowed in Chapter 7 where the lien is partially secured but may be permitted if the lien is wholly unsecured. For instance, if you own a home that is worth $200,000 but owe $250,000 on your first mortgage and $50,000 on a second mortgage, the second mortgage will be treated as an unsecured loan, but the entire balance of the first mortgage will still be classified as a secured loan. Thus, it is used as a tool only to eliminate a 2nd mortgage or Jr. lien.

Stripped liens will receive the same treatment as all your other unsecured debts (i.e. credit cards) in bankruptcy. See Bankruptcy law 11 US 506 These debts generally receive nothing or a small amount and get discharged at the completion of your bankruptcy. The specifics will vary based on the individual facts of each case, contact a bankruptcy law firm in Tampa for more information.

Lien Strip a Car Loan

Lien stripping can also be used to reduce the balance of a car loan. If the lien is stripped down to the market value, the remaining loan balance will be treated as an unsecured claim in bankruptcy and subject to discharge. For example, if you owe $10,000 on your car but the vehicle is only worth $5,000, then $5,000 would be classified as a secured claim and the remaining $5,000 would be treated as an unsecured claim. To see if you qualify to eliminate a 2nd mortgage or strip a car loan, contact a bankruptcy lawyer in Tampa, this article is for general information only.

Bankruptcy Attorney in Tampa

If you are having a difficult time meeting your financial obligations, Florida Law Advisers, P.A. may be able to help. Our bankruptcy attorneys in Tampa have years of experience helping people just like you to solve their financial problems. We understand these are very difficult times and we are here to help. In some cases, filing for bankruptcy may be a good solution, however, it is often not the only solution available. The right course of action will depend on the unique circumstances of each case. To see which options may be available to you, contact us to today to schedule a free consultation with a bankruptcy attorney in Tampa.

The U.S. Trustee’s Office recently announced changes in the median income used in the Chapter 7 bankruptcy means test. This is significant since all Chapter 7 petitioners must pass the means test in order to qualify for Chapter 7. If an individual does not pass the means test their only bankruptcy option will be to file for either Chapter 13 or Chapter 11. The U.S. Trustee will typically change the median income figures twice a year, the recent changes became effective May 1, 2014. The next adjustment to the median income figures are expected to be announced in October or November of this year.

The median income levels used for Chapter 7 eligibility is derived from the Census Bureau and are based on the actual incomes of Florida residents. The median income levels are broken down into family size by geographic region. The median income for Florida residents increased by over 1.46% for all family sizes.

The increased median income will allow more people to qualify for the means test. If your average income over the most recent 6 months is lower than the state median income for a household of the same size as yours, you automatically pass the means test. Thus, the higher Florida’s median income is the greater the likelihood you will pass the means test. If your median income is above Florida’s median income you will need to continue with the means test to determine your eligibility for Chapter 7 bankruptcy. To learn more about the means test click here.

Florida’s Median Income Effective May 1, 2014:

• Household of 1person = $41,939
• Household of 2 people = $52,598
• Household of 3 people = $54,742
• Household of 4 people = $64,122

Florida’s Previous Median Income:

• Household of 1person = $41,334
• Household of 2 people = $51,839
• Household of 3 people = $53,952
• Household of 4 people = $63,196

Change Measured in Dollars:

• Household of 1person = $605
• Household of 2 people = $759
• Household of 3 people = $790
• Household of 4 people = $926