If you are facing bankruptcy in the near future, your creditors could attempt to get their hands on your assets and property before bankruptcy is actually filed. This is referred to as "preferential transfer." Creditors do this because they receive more this way than when your assets are liquidated per the Bankruptcy Code. However, there is hope if a creditor has successfully acquired your assets prior to bankruptcy proceedings. The Bankruptcy Trustee has the power to have your assets relinquished by the creditor or avoid their confiscation in the first place.
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What powers does the trustee have?
The bankruptcy trustee can stop or avoid asset distribution to creditors. The trustee can do this if the debtor cannot meet creditor requirements or if the debt's due date was before the transfer occurred. For the trustee to act, the preferential transfer must meet the following requirements:
Transfer on or prior to 90 days before the filing date of the bankruptcy petition
If the creditor is an insider, transfer between 90 days and a year before the filing date of the petition
If the creditor took these actions, they would receive a greater share of your assets than if:No transfer took place
Your case falls under Bankruptcy Code, Chapter 7
Your assets were distributed under the Bankruptcy Code's stipulations
In some cases, the trustee cannot exercise the power to avoid preferences. These situations include:Payments of child support
Day-to-day financial or business activity
Security interests done within a 90 day period
Credit counseling agencies and other approved non-profit groups could implement repayment plans for you that a trustee also could not interfere with.
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