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Paying back friends or family before filing bankruptcy

If there is a chance you may need to file for bankruptcy under chapter 7 or 13, you should not pay back loans you borrowed from your family or friends or other associates (insiders) as it could have unintended consequences after you file bankruptcy. Paying back insiders is considered preferential treatment if the loans were paid back within two years of filing bankruptcy. If the amount you paid back was over $600, the bankruptcy trustee assigned to your case will seek to recoup the payment from the lender. It is okay to pay these insiders back after you have filed bankruptcy but not before.