9/07
I owe my family some money, can I just pay that back first?
Yes, but they may be sued as a result. So it might not be a good idea!
A core idea of bankruptcy is that all creditors are treated equally, as much as possible, before and during a bankruptcy case. Historically this was more important than whether you could get any relief from your debt!
So if you repay friends of family more than a very small amount of money within the year before filing a bankruptcy, two things will happen. First you will have to tell the truth that you did it. It's easy to find out you did it and you can go to jail for lying about it. The second thing that will normally happen is the trustee will sue the folks you paid, so he can take the money you paid them and redistribute it evenly among your other creditors. The technical term is "avoiding a preferential transfer" because you "preferred" one creditor over the others.
Since you can always repay a debt after a bankruptcy is over, it is almost always better to spend any money you have right now on things or services you really need. Then repay these debts, if you wish, after the case is complete.
Further reading: Trustee recoveries
A core idea of bankruptcy is that all creditors are treated equally, as much as possible, before and during a bankruptcy case. Historically this was more important than whether you could get any relief from your debt!
So if you repay friends of family more than a very small amount of money within the year before filing a bankruptcy, two things will happen. First you will have to tell the truth that you did it. It's easy to find out you did it and you can go to jail for lying about it. The second thing that will normally happen is the trustee will sue the folks you paid, so he can take the money you paid them and redistribute it evenly among your other creditors. The technical term is "avoiding a preferential transfer" because you "preferred" one creditor over the others.
Since you can always repay a debt after a bankruptcy is over, it is almost always better to spend any money you have right now on things or services you really need. Then repay these debts, if you wish, after the case is complete.
Further reading: Trustee recoveries
