July 9, 2015
An individual facing harassment by a creditor may go to extreme lengths to stop the barrage of phone calls and letters demanding payment.  They may sell their belongings to make payments to the creditor, or may divert funds intended for rent and other living expenses in response to the threats of the debt collector.  Debt collectors know that the adage “the squeaky wheel gets the grease” applies to collection as well, and they understand that they will get the most money for their clients if they make a debtor uncomfortable or by making them fearful that further action will be taken, such as garnishment of wages or levy of bank accounts.
If a creditor receives more than their fair share in the period leading up to a bankruptcy, that creditor may be forced to return all or a portion of the money they received.  The Bankruptcy Code prevents one creditor from receiving a “preference” over other similar creditors, and allows the Trustee to demand return of funds received, directly or through garnishments and similar actions, in the 90 days leading up to a bankruptcy filing.  In certain circumstances, the debtor can demand the return of the preference payments as well, and may be permitted to keep the funds if they can be exempted in the bankruptcy proceeding. 

The ability of the Trustee in a bankruptcy to avoid and recover preferential transfers is covered in 11 USC §547, and is important to understand for anyone facing aggressive collection efforts, or by an individual who has had their wages garnished or bank accounts levied.  An experienced bankruptcy attorney can assist you with understanding how to handle these situations, and can explain how the timing of your bankruptcy filing may be crucial related to potential preference payments to creditors.  We invite you to contact our office if you are dealing with pressure from debt collectors, garnishments, or a levy on your bank accounts, and to set up a time to meet with one of our attorneys to discuss how we may be able to stop the harassment, and possibly recover some of the funds transferred to creditors during the period leading up to a bankruptcy filing.

Michael  A. Spencer
Associate Attorney



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