Can A Chapter 7 Trustee Sue My Relatives for Money That I repaid them before I filed for Bankruptcy? What is a Preference?

Yes, if you are about to file chapter 7 bankruptcy, don't repay any relatives or friends for money that they have lent you. If you do, your bankruptcy trustee can sue them to get it back! Trustees use these "strong arm" powers to get money back that you have repaid in the 90 days before you filed bankruptcy for ordinary creditors (unsecured creditors) or in the 1 year before filing bankruptcy for "insiders" which includes relatives and in many cases, your friends.

That's why in some cases it may be suggested that you want to wait to file bankruptcy, at least if you want to try to protect these payments from being recovered by your chapter 7 trustee. Better suggestion: just don't pay them before you file bankruptcy. You can always pay your relatives or friends after your bankruptcy is over, from money that you earn after the filing of the bankruptcy.