Posted on 17th Apr 2010 @ 3:56 PM

We had a situation recently that ended badly for the debtor that you’ll want to be aware of, to prevent this from happening to others.

At the 341 meeting, the trustee requested information from the debtor in regards to a PayPal transfer of $1,000 the day before the debtors bankruptcy petition was filed, that appeared on his checking account statement.

What is PayPal?

PayPal is an e-commerce business allowing payments and money transfers to be made through the Internet, serves as an electronic alternative to traditional paper methods of payment, such as checks and money orders, and can be funded with an electronic debit from a bank account or by a credit card.

So now that we know what PayPal is, you can understand why a PayPal payment of $1,000 less than 24 hours before filing the bankruptcy petition looked really suspicious. 

When I first heard about this, I have to admit, it sounded suspicious to me too, but it turns out that this transaction was actually legitimate.

What had happened is that the debtor had paid the attorney fees to the attorney electronically using his PayPal account.  Why is this problem?  Well…it isn’t.  The problem came in as being that the PayPal account had not been disclosed on the bankruptcy petition.

And although the attorney corroborated this, the issue was further complicated by the fact that the debtor had made a mistake in sending the payment, and it never cleared his account, and the attorney didn’t get paid, so the money came back to the debtors account.

Now is where it gets ugly…because the trustee not being happy about this account not being disclosed, he seized it, and the debtor lost the money.  Ouch! 

The moral of the story is that we now live in a digital world, and people are now using digital means to make purchases and pay bills.  This being the case, it is VERY IMPORTANT that we do our very best o help the debtor to disclose ALL bank accounts…even PayPal accounts, and other similar accounts.

Clay Holland
Operations Manager
713Training.com
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DISCLAIMER: We at 713 Training are not attorneys; any information provided by 713 Training should not be considered legal advice.  The information in this article, and any other materials provided by 713 Training, whether delivered verbally, written or via any other means, including electronic/digital delivery and storage, is for training purposes only, and is intended for individuals who work under the direction of a licensed attorney.