If a borrower repays two thousand dollars in principal on his federal student loan, will the judge reverse this payment as a

Bankruptcy 3 views 3 answers
preference if done within thirty days of filing chapter seven bankruptcy?

Attorney Answers

3
Robert W GambrellChapter 13 Bankruptcy AttorneyOxford, MS ·
A preference is a payment to a creditor that holds an antecedent (pre-existing) debt, upon which a payment is made within 90 days preceding the filing of the bankruptcy, resulting in the creditor receiving more that it would in a chapter 7 liquidation. Thus, your payment to the student loan would be a preferential transfer. However, if that is the only potential asset in the bankruptcy, none of the trustee's in our state would sue the creditor to collect the debt, because the time and expense involved would outweigh the benefit of recovering the funds as it is likely that the funds recovered would not result in a meaningful distribution to the creditors. If the $2,000 preferential transfer was just one of several assets that the trustee can recover, then he/she probably would pursue collection of the funds.
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Matthew Berkus ·
Yes, that would be a preferential payment. The trustee could undo it if it was in the best interests of the creditors to do so.
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Brent Snyder ·
They could file a preference action but $2000.00 is a pretty small amount to administer an estate for. If you are that concerned you could delay filing if that is an option.
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