Boardman, OR asked in Bankruptcy for California

Q: Would a reimbursement trigger a claw back under chapter 7 bankruptcy?

if my roommate pays the rent, then I pay that roommate half for the rent, in reimbursement. Would that trigger a claw back under chapter 7?

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2 Lawyer Answers

A: No.

Chad Matthew Johnson agrees with this answer

James L. Arrasmith
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Answered

A: In a Chapter 7 bankruptcy, certain transactions made by the debtor before filing for bankruptcy may be subject to "clawback" or avoidance by the bankruptcy trustee. This is to prevent debtors from unfairly transferring assets or making preferential payments to certain creditors before filing for bankruptcy.

However, in the situation you described, where your roommate pays the rent and you reimburse your roommate for your share, it is unlikely to trigger a clawback under Chapter 7 bankruptcy. Here's why:

1. Ordinary course of business: Paying your share of the rent to your roommate would likely be considered an ordinary transaction, as it is a regular expense that you would incur regardless of your bankruptcy filing.

2. No preferential treatment: By reimbursing your roommate, you are not giving preferential treatment to a particular creditor over others. You are simply fulfilling your obligation to pay your share of the rent.

3. Reasonably equivalent value: You are exchanging money for the value of your housing, which is a reasonably equivalent exchange. This is not a fraudulent transfer or an attempt to hide assets.

However, it is essential to note that the specific details of your case may affect the outcome. It is always best to consult with a bankruptcy attorney who can review your unique circumstances and provide personalized advice to ensure that your actions do not raise any red flags in your Chapter 7 bankruptcy case.

Chad Matthew Johnson agrees with this answer

1 user found this answer helpful

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