Browse terms
The bankruptcy process
Insider
A person or business with a close relationship to the debtor, such as a relative, a business partner or a company the debtor controls. 1
Talk to a lawyerHow it works
For an individual debtor, the Bankruptcy Code's list includes relatives, a general partner, a partnership in which the debtor is a general partner, and a corporation of which the debtor is a director, officer or person in control. 1
A relative is a person related by blood or marriage within the third degree, including step and adoptive relationships. 1
The label matters because payments to insiders are examined over a longer period. A trustee may be able to undo certain payments made to an ordinary creditor within 90 days before the filing. When the creditor is an insider, the period reaches back one year. 2
Repaying a family member before filing can therefore be undone by the trustee, if the other conditions for a preference are met. The statement of financial affairs asks about transfers of property. 2 3
Common questions
Is my parent an insider?
Yes. Relatives of an individual debtor are insiders, and a parent is a relative. 1
Does repaying a relative before filing cause problems?
It can. A payment to an insider on an existing debt, made within one year before filing while the debtor was insolvent, may be undone by the trustee if it gave that person more than they would receive in a Chapter 7 case. Ask a lawyer before repaying anyone ahead of a filing. 2
Sources
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