Many debtors considering bankruptcy hesitate because they have taken out loans from friends and family and don't want to "wrong" them by filing bankruptcy. Many debtors even make the mistake of hiding or secretly repaying friends and family loans while filing bankruptcy on their "other" debt. We need to talk about this very real and emotional bankruptcy issue that causes many debtors unnecessary anguish when considering bankruptcy.
Number 1: When you file bankruptcy, you must include all of your debts. That includes loans you took out from friends and family (yes, even your mom or grandmother). If you fail to list all of your debts in bankruptcy it could land you in big trouble including facing a dismissal of your bankruptcy case.
Number 2: After you receive a bankruptcy discharge, there is nothing stopping you from repaying debts that have been discharged in bankruptcy. Although it is not recommended, you may choose to continue repaying debts you owe family and friends or any other loan for that matter. But remember, once you receive a bankruptcy discharge you are no longer legally obligated to repay those loans that were discharged. The purpose of bankruptcy is discharge debt so that you get a fresh financial start, so repaying discharged debt may defeat the purpose; but the final decision is for you to make.
Number 3: It may be in the best interest of your relationship with friends and family, if you explain to them why you are filing bankruptcy and make it clear that your financial position is seriously compromised because of the unbearable debt load. You may be surprised at how many of them may understand.