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Bankruptcy Law/Chapter 13 vs 7


I live in Texas. You previously mentioned that a bankruptcy court generally scrutinizes finances for the past 2 yrs in a Chapter 7 filing. I was recently the named beneficiary of approx $100k in life insurance and stock, which I shared equally with my 4 siblings, as that was my mother's wish. I have no intentions of going through the humiliation of the courts trying to retrieve funds from my siblings, money which is rightfully theirs. Is the process different if I file Chapter 13? Thanks again for your time.

If you have something in writing from your mother stating that this is what was to happen, that would suffice;  however as I understand the facts, you were named by her as the sole beneficiary of the $100k and the deal to split with your siblings was more of a  "handshake" type arrangement than anything binding you legally.  If that's the case, they have received a gift from you and I would suggest not filing bankruptcy to out run the 2 year preference recovery period.  Keep in mind the trustee can still claim this was a fraudulent transfer and try to recover under that theory, but after 2 years it's no longer "automatic" and I'm not sure you even have to disclose such transfers made more than 2 yrs prior to bankruptcy.  13 wouldn't help because the liquidation analysis where what you're paying your unsecured creditors is compared with what they'd get in a 7, would include the preference recovery or at least you paying that amount ($75,000) over the plan period (probably 5 years).  That item alone with the trustee's rake would equate with $1,375/mo in plan payments, over and above whatever else is required.

Your best bet is out run the 2 year preference period.  I do invite you to get a second opinion.  It is obvious that there is no fraud with this transfer but if the transfer was made to "insiders" within 2 years of the bankruptcy, the intent doesn't matter if it was your property that was transferred and as I see it, you did transfer your property because there's no legal requirement to do so and you were the sole bene under the life insurance.  

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Consumer bankruptcy questions invited. I've been filing Chapter 7, 11 and 13 cases since 1985 in Calif and Arizona. I do NOT do homework questions. Let me know what state you're located in when you write. My bankruptcy practice is limited to California and Arizona but inquiries from other states are welcome. Your local jurisdiction determines exemptions. Find more background information at our website, Individual Chapter 11 and small business chapter 11 questions invited. We can also advise on the creditor's side if for example you have a fraud case, money judgment etc against someone who has filed (or is threatening) bankruptcy. We have filed and defended numerous adversary complaints in bankruptcy court and opposed trustees' demands for turnover of assets from time to time.


My partners and I have filed over 5000 consumer and small business cases to date in California and Arizona.

I've been a member of the California bar since 1984 and Arizona since 2004; also a member of the National Association of Consumer Bankruptcy Attorneys, Bankruptcy section of the Arizona State Bar, Tucson Association of Consumer Bankruptcy Attorneys, Arizona Consumer Bankruptcy Counsel and American Hellenic Educational and Progressive Association (AHEPA).

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