Des Moines, IA (Law Firm Newswire) April 1, 2013 – Preference actions return money to a bankruptcy trustee, for use in discharging a debtor’s debts.
Many people are not aware of the preference action, which is a lawsuit, filed by a bankruptcy trustee, to get funds paid to a creditor before bankruptcy is filed. If the trustee has all they need to file, they must do so within two years of when the debtor files for bankruptcy protection. If they miss this deadline, the suit cannot be filed, indicates Iowa bankruptcy lawyer, Kevin Ahrenholz.
The ability to get money back that a debtor has paid out to a creditor before filing bankruptcy is referred to as avoidance powers. In other words, they have the power to null a transaction and reverse the effect, thus getting back any money or property a debtor transferred to another person.
Preference actions are limited, meaning they apply only to transactions that happen between a debtor and a creditor. For instance, if the debtor made a large payment, during the preference period, and did not get new credit in exchange, the trustee may avoid the payment, because the debtor paid, or preferred, one creditor over another remarked Ahrenholz.
The preference period is 90 days before bankruptcy is filed for regular creditors and one year if the debtor is a family member. With the regular creditor, if a debtor paid $1,000 to pay off a credit card in December, and the minimum payment is $50, and then files for bankruptcy protection January, the trustee may get the money back from the credit card company. If the creditor is a sister, and money owed her is paid back within a year before filing bankruptcy, the trustee may sue to retrieve the money.
There are many rules and regulations that govern bankruptcy, and it is for this reason that a debtor considering seeking bankruptcy protection should discuss their case with an experienced Iowa bankruptcy lawyer. While debtors may file bankruptcy on their own, without legal assistance, this is not advisable, as one mistake could invalidate the whole process. Additionally, if any of the rules are misinterpreted, or something is not declared, because the person was not sure it should be, it could result in fraud charges being laid against the debtor.
Declaring bankruptcy is a difficult thing to do, but these days, there is no longer the same stigma attached to it. People are finding out that there ‘is’ life after bankruptcy and that they can indeed still get credit and buy a house. Sometimes, life just happens.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
309 Court Ave., Suite 805
Des Moines, IA 50309
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.
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