If You're Gonna Be a Bankrupt, Don't Be a Banker!

Ordinary people of all sorts just plain like to help.

And during a depression, it's hard to resist when a family member wants a loan, or wants you to pay back a loan. Or asks you to park money in your account, because some creditor is chasing the relative or friend.

If you have issues yourself, and might need to file a bankruptcy, find it in your heart to resist. Don't give a loan to a relative. Don't pay back a loan to a relative. And don't let a friend, relative, or lover park money in your account.

The reasons are pretty simple. If you repay an unsecured debt to an insider within a year of filing your bankruptcy, the trustee will simply rub his hands together and say, "Yummy!" You have unwittingly exposed your beloved mother, grandmother, dada, or memu to a lawsuit.

The polite trustees always ask if you want to pay them the amount of the preference, or if you'd rather they simply let slip the dogs of war on Grams.

If you loan money to a relative, and you don't receive that amount back prior to filing your bankruptcy, it's an ordinary account receivable. And the polite trustees will ask if you want them to sue your sister with cancer, or if you'd rather pony up that amount.

And DO NOT let somebody park dough in your bank account. It's just bad business. What if one of your creditors garnishes that dough out of your account?

Your friend becomes your former friend.

And what if you give that amount back to your soon-to-be-former friend just prior to filing? It looks just like a preference, or a fraudulent transfer.

So unless you want to learn the rules of tracing and co-mingling money, just say no!