An insider payment is when you borrow money from a friend or family member and repay them within twelve months prior to filing your bankruptcy case.

The significance of an insider payment is that the trustee can make you pay the bankruptcy estate the same amount of your insider payment in order to get your bankruptcy discharged.  For example, six months prior to filing your bankruptcy case, you repaid your mom $5,000.  Because you chose to repay your mom instead of using that money to pay your creditors the trustee will require you to pay him/her $5,000.  The trustee in turn takes that $5,000 and uses it to pay creditors.

Your other option is to wait to file until the twelve months have expired since the time of your insider payment.  We strongly recommend not repaying friends or family members during your bankruptcy process to avoid this as an issue in your case.

An insider payment is different from a gift because it is a repayment.  Any gifts over $600 to any one individual two years prior to filing your bankruptcy case or any charitable donations need to be disclosed as well on your paperwork.

Any insider payment regardless of the amount of the repayment is required to be disclosed.  If you have any questions about an insider payment and how it may potentially affect your bankruptcy case, it is best to consult with an attorney to determine the best time to file your case.