Legal Question in Bankruptcy in Massachusetts

Insider Preferences?

I am considering filing for bankruptcy. About 6 months ago, while still thinking I would eventually pay off my debts, I transferred a large balance from one card to another. In order to get the best balance transfer rate, I needed to clear one card and then transfer funds back to it. I borrowed several thousand dollars from a friend, cleared the card, and took a large cash advance (deposited to my account) at a new low rate on that cleared card. I then paid back the friend and used the rest to pay off another higher interest card. Will my repayment of my friend (who was paid back within about a month of the loan and knew what the loan was for) count as an insider preference if I file now? Should I wait for a year to pass since the friend cashed the repayment check? Thanks for your help!!


Asked on 3/02/06, 2:03 pm

2 Answers from Attorneys
Barry Levine Law Office of Barry R. Levine

Re: Insider Preferences?

Your friend, unless he is a family member, is not considered an insider pursuant to the Bankruptcy Code. Ninety days is the preference period for persons who are not insiders.

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Answered on 3/02/06, 2:14 pm
David Baker Law Office of David Baker

Re: Insider Preferences?

Very good question! Unless your friend is a "significant other", a family member or a business partner (or some relationship like that), the friend would not be an insider. For non-insiders, the preference period is 90 days, so if this took place outside of 90 days, you should be ok. I would be a little concerned about the cash advances, because under section 523(a)(2)(C)(II), a cash advance of more than $750 is presumed non-dischargeable if the advance was taken on or within 70 days. So if this all took place 6 months ago, again you should probably be ok. Call me if you'd like more help.

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Answered on 3/02/06, 2:50 pm


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