Preferential payment

NewLeaf18

Hi does anyone know how far the OR looks at regarding preferential payment in bankruptcy?

Also would I have any issues wiht this?

I rented with my spouse from one year ago. We are financially completely independent.
I've been in debt for for a few years and have had my head in the sand. Due to my poor credit ratings my wife has been paying for rent but I've tried to pay her back as much as I can. In the last year, up until 6 months ago i 've been transferring £1000 (total £6K) to her bank aco!!!! each month. But she pays for the cost of rental and living expenses.

In addition, 3 months ago she transferred £5K (from her own savings) back into my account to help me out with financing.

So on paper, there are bank transferrals, but 1) its about neutral amount in and out and 2) my payments were for for living costs. Is this considered preferential payment and will the OR have issues? Just dont want anyone to be demanding money of her after all this..

Thanks

System

You would be expected to contribute towards rent and living expenses anyway so as far as anyone is concerned, this is your contribution. The £5k is your wife trying to help you out with your debt. Typically without a clearly laid out contract there is not deemed to be a financial agreement as in a repayable loan with family and friends.

National_Debtline

Hi NewLeaf18 and welcome to MSE,

NewLeaf18 wrote: »

I rented with my spouse from one year ago. We are financially completely independent.
I've been in debt for for a few years and have had my head in the sand. Due to my poor credit ratings my wife has been paying for rent but I've tried to pay her back as much as I can. In the last year, up until 6 months ago i 've been transferring £1000 (total £6K) to her bank aco!!!! each month. But she pays for the cost of rental and living expenses.

In addition, 3 months ago she transferred £5K (from her own savings) back into my account to help me out with financing.

Ultimately, this will be up to the OR and he may ask to see more details about why your wife suddenly need you to contribute £1000 per month when you had never done that before? The fact that you phrase it as "trying to pay her back as much as possible", would suggest one of you viewed this as a debt and you may have given her money in preference. Although it is completely fair that you contribute to the household bills, the issue here is that it hasn't been consistent. Anything out of the ordinary is likely to be looked at more closely by the OR.


If the OR feels there has been a preference payment they can look to recover that from the person who received it. And, unfortunately, the £5k that your wife gave to you would either be considered a gift (which is not something you would repay) or a debt and she would need to be listed as a creditor. It may be worth checking this is the best option for you and speak to one of the free debt charities.


Laura
@natdebtline