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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I thought about filing for Chapter 7 last fall, but didnt

Resolved Question:

I thought about filing for Chapter 7 last fall, but didn't really want to and decided not to file. I had met with a lawyer and paid him a retainer. At the time I owed my accountant (I own a small real estate brokerage) for preparing my taxes last year. The lawyer said if I paid him when it was 30 days late. As a realtor my income is uneven. Now I have no income is coming beyond a small pension and social security which makes my income around $1000 a month. I can't stay in business with no clients because I can't afford the overhead.

But, and here comes the question. My lawyer has said that because I paid my tax bill 30 days late the bankruptcy court could come to me and say that I favored my tax preparer which isn't allowed.

I now do have to file, but it will leave me penniless. Any advice?

Judith C.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

1) When did you pay the accountant?

2) How much did you pay the accountant?

Customer: replied 5 years ago.
I paid him $1,778.54 on March 18, 2011 for work done in October 2010. And $636.78 on December 26, 2010, for the same work. I wanted him to do my 2010 taxes and had to pay him what I owed before he would prepare them. I now owe for 2010 and can't pay.
Expert:  cfortunato replied 5 years ago.

The payment to the accountant can be viewed as a "preference", and can be avoided by the Bankrutpcy trustee if the debtor files a Bankruptcy less than 90 days after the payment was made and while the debtor was insolvent (total assets less than total debts). Bankrutptcy Stat. 547(b). (A payment made on March 18, 2011 would not be considered to be a preference if a Bankruptcy is filed after June 18, 2011.)

A preference can be "avoided" by the Bankruptcy trustee, which means the trustee can demand that the creditor - not the debtor - pay the preference amount to the Bankrutpcy court.

 

I think this is what you wanted to know. If not, please let me know.
Thank you!

 

 

 

 

Customer: replied 5 years ago.
Just to be sure, if I wait to file till after June 18th, this payment won't be considered a preferential payment and neither I nor my accountant will be penalized. Is my understanding correct?

And do you know how often the Bankruptcy Trustee demands that the creditor "reimburse" the bankruptcy court?
Expert:  cfortunato replied 5 years ago.

Yes - if your Bankruptcy is filed after June 18, the payment to the accountant will not be considered to be a preference.

If the payment is deemed to be a preference (if you file before June 18), the Bankruptcy trustee will demand that the accountant return the payment - to the Bankruptcy court. It is the trustee's job to do this.

Customer: replied 5 years ago.
Thanks, XXXXX XXXXX I was thinking it had to be 6 months. Stop.
Expert:  cfortunato replied 5 years ago.

No - according to the relevant statute, it is 90 days.

 

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Thank you!

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