The Bankruptcy law allows Trustees to “look back” 90 days before the filing of a bankruptcy petition and to set aside or recover any payments or other transfers to creditors that were made to pay debts if they were not in the “ordinary course of business of the debtor.” This 90-day look back period is extended to 1 year if the payment or transfer was made to a relative or “insider” of the debtor.
This is a complex area of bankruptcy law with detailed rules and practices that apply. But here’s a simple example: You know you’re going to file bankruptcy, so a couple of months before you file you start paying some of your old debts, but not all of them—like the money you owed to your brother or old bill you owed to the doctor. The bankruptcy Trustee could sue to get that money back. Too bad for you, especially if there was a way to plan and protect those funds in your bankruptcy case so that they would be available to you after you file.