Preferential payments

brokemummy123

13 months ago my mum lent me some money to buy a car. I have been paying her back £100 pcm without fail.

At what point does she become a preferential creditor? How many months before bankruptcy does this apply to? I’d like to
clear it if I can before bankruptcy, but then that’s surely making her a preferential creditor.
Also, if I used space on my credit card to pay her back presumably that would make her a preferential creditor too?

terrence45

Using your credit card to buy her things (£100 a month-ish) probably wouldn't be picked up by the OR. How would they know you were buying her shopping? I'm not getting into the moral aspects, because I don't care


The payments up until now - were they in cash, or did you ping the money into her account? The OR MAY ask you about this, and if you've not been repaying other debts, they may have an issue. However, if you have tens of thousands on a credit card, paying the minimum, and have paid your mum back like £1000, I doubt they'd really care.


I think the OR usually looks about 2 years prior to bankruptcy. I had a HUGE repayment to a family member about 2.5 years prior to bankruptcy and it was never brought up.

brokemummy123

Thank you for your reply. I’ve been paying her via bank transfer to her account, but also making payments to cards too.

debt_doctor

Hi,

A preference is a payment 'other than in the ordinary course of business' with a view to improve than creditors position if you became insolvent.

This means that a contractual or agreed payment cannot be a prefrence. It would become a preference at a point you knew you would become bankrupt, you made extra payment or paid it off.

DD

terrence45

debt_doctor wrote: »

Hi,

A preference is a payment 'other than in the ordinary course of business' with a view to improve than creditors position if you became insolvent.

This means that a contractual or agreed payment cannot be a prefrence. It would become a preference at a point you knew you would become bankrupt, you made extra payment or paid it off.

DD

That answers that then! We all learned something today :T

So if you stopped repaying your debts now, because you know you're going bankrupt, but kept paying your mum or paying her even more while you can, this would be frowned upon. Of course, using your credit card or cash wouldn't be traceable as a payment to her (not condoning this).