Quote from: DeathAndTaxes on September 12, 2012, 09:26:49 PM

Quote from: SgtSpike on September 12, 2012, 09:03:09 PM

To confirm, those payments can be reversed even in the case of personal bankruptcy?

Any payment can be "voided" if allowed by statute (in the US it is 90 days prior to the BK petition). However it is rare for personal payments to be voided. A classic example. Someone is in debt (lots of creditors - multiple CC, a signature loan, a loan on a jet ski, loan on car, student loan, mortgage etc). They get into financial trouble and the liabilities are more than the income.

This person decides to forget the jet ski, CC, and signature loan. They use the little income they have to keep making payments on their mortgage and car note. Technically the trustee could void the prior 3 mortgage and car payments, return that cash back to the bankrupted estate and divide it among creditors. In 99.9% of the cases the trustee won't. It is human nature to try and save your home. The debtor hasn't done anything which indicates that he is trying to defraud anyone.

Another example. Same debtor has $10,000 in gold coins. He decides to sell the gold coins to his brother for a lawn mowever worth ~$100 less than 90 days before the BK petition. The trustee would likely void this payment. The gold would return to the estate. The brother would become a secured creditor and could either seek to get his lawn mower back or get fair market value on a prorated basis with other creditors.

Just because a trustee "can" void a payment doesn't mean they always will. There is no absolute rule "line in the sand". Generally speaking trustees use common sense to determine an equitable arrangement. There are far too many unique situations for the law to handle every possible case.

One thing that I would add is that the period is longer if the parties are not dealing at arms length. Here is Canada it would likely be 12 months for the $10,000 in gold coins / lawn mower trade with a family member. http://laws-lois.justice.gc.ca/eng/acts/B-3/page-68.html#h-32 I do agree it is rare in personal bankruptcies but it can happen especially if there are non arms length deals involved.