Who said the law is intuitive?

You should not trust your instincts, but check things out with an attorney before acting.  Sometimes, it just takes a phone call.

 

A recent Wisconsin Law Journal article gives a good example.  A mother got a loan from a bank which was guaranteed by her son.  Later, in contemplation of bankruptcy, she stopped paying her creditors except the bank.  By paying the bank, she thought she could reduce the amount her son would owe them on his guarantee.  Unfortunately, that was not the result.  Instead, the court ordered her son to pay an amount equal to the payments made by his mother to the bank in the year before filing for bankruptcy to the trustee in bankruptcy.  The court deemed her payments to be a preferential payment in contravention of the  general policy behind the Bankruptcy Code that all unsecured creditors are to be treated the same.  Otherwise, her son would get the benefit of the payments and, therefore, be in a better position than the other unsecured creditors.