Paying Preferred Creditors

July 25, 2012

Clients may wish to delay a bankruptcy until after they have paid creditors whose claims they do not want to see discharged, for example friends or grantors of credit cards they hope to keep.  Such payments, if over $600 and within the applicable preference period could be set aside by the bankruptcy trustee.  Thus, if a client wants to pursue this course of action, and ensure that the creditor retains the payment, the petition must be delayed until after the preference period has run.

In most cases, it is preferable not to delay a bankruptcy for this purpose, but rather to pay the creditor after the petition is filed, using either exempt assets or post-petition income.  There is no impediment to this course of action in a chapter 7 case and usually it will not be questioned in a chapter 13 case.