We are filing chapter 13 bankruptcy. We know we will pay back 100% owed due to our income so all of our creditiors will get 100% of what is owed.. In order to minimize our monthy payment my husband wanted to pay down one of credit cards prior to filing. We met with our lawyer today who screamed at us saying he told us not to do this as it shows preference ( he never told us not to do this). since everyone will be getting 100% is this really an issue.
Answer
This is not a preference. Section 547(b)(5) says that a payment is not a preference if the creditor receives "more than such creditor would receive if - the case were a case under chapter 7." Here if you are already paying 100% in the Plan, then they are receiving an equivalent amount. This payment will have to be disclosed in the Statement of Affairs for the Trustee's review. Certainly an unusual fact pattern, but I can understand why the payment was made.
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