Payments to Creditors Before Chapter 7 Bankruptcy

If you know that filing for Chapter 7 bankruptcy in Phoenix, Arizona, is on your horizon, it is normal to consult with a qualified bankruptcy attorney, and to begin making preparations for the filing. If you are still making payments, it is important that you make payments to all of your creditors or to none of them. Paying just some of your debts means showing preference for one creditor over another.


Within a 90 day period of your Chapter 7 bankruptcy filing, any payments that you made to creditors can be taken away from that creditor and returned to the trustee of your Chapter 7 bankruptcy case. That period is up to one year for payments made to an “insider,” such as a relative or friend. This rule does not apply to regular and necessary expense payments such as car payments, house payments, rent, and utilities.

The court will use all of these payments to make sure that all creditors are treated equally in the Chapter 7 bankruptcy filing. All of the monies that the trustee receives for your assets are divided equally according to the court ruling.

An experienced bankruptcy law firm should be consulted about how to handle debt payments prior to filing for Chapter 7 bankruptcy.