An Englewood Bankruptcy Lawyer Explains What Constitutes a Preferential Transfer

If you are considering filing for bankruptcy or have filed for bankruptcy and are wondering about any payments you have made via credit card, an Englewood bankruptcy lawyer can advise you regarding whether this money can be recovered by your trustee.

What is a Preferential Transfer?

A preferential transfer is money you have paid to a creditor that can be recovered by the bankruptcy trustee. If these payments were made using a credit card within 90 days of your filing for bankruptcy, then this money can be recovered. If your payment was a charitable contribution, it may be considered a preferential transfer if it was greater than 15% of your gross annual income and is inconsistent with your previous pattern and practice of charitable contributions.

Not all payments in that 90-day window can be considered preferential transfers. If the creditor is fully secured then payments are not considered preferential because the creditor will not make any more on its claim than it would if your holdings were to be liquidated. Also, if the debt was incurred due to normal business and paid within 45 days of the date the debt was incurred, then it would not be considered a preferential transfer.

Other Limits to Preferential Transfers

Preferential transfers are not applicable to the spouses, former spouses, alimony payment or maintenance or support for children. In addition, if your debts are primarily consumer debts and are less than $600, then it will not be considered a preferential transfer. If your debts are not primarily consumer debts, then it will not be considered a preferential transfer if the amount is less than $5,850. There is a time limit on preferential transfers. A trustee has two years to claim from the entry of the order for relief. The few exceptions to this rule can be explained in detail by your attorney. Once a transfer is determined preferential, the trustee will demand the creditor return payment or property. Usually the creditor will comply, or the creditor can be sued.

For more information regarding preferential transfers, contact an Englewood bankruptcy lawyer at The Radol Law Firm. Our firm has over 30 years of experience and we are ready to assist you through your legal matter.

The Radol Law Firm is proud to serve the people of New Jersey in their divorce and family law, elder law, estate planning, and bankruptcy matters. Contact our firm today to schedule a consultation.