Thinking of Filing Bankruptcy On Family Loans?
If you're like most debtors you've probably borrowed cash from family and friends as you struggled to stay afloat and avoid filing bankruptcy. And like most debtors you probably don't want to discharge your loved one's loans in bankruptcy. But if you're tempted to avoid listing your family loans on your bankruptcy petition and repay them on "the side" below are a few reasons why that's a really bad decision.
It's Illegal To Hide Mom's Loan During Bankruptcy
The bankruptcy law states that all debts must be listed on your bankruptcy petition. If your relative or friend loaned you $1000 you must disclose that fact to the bankruptcy court. If a debtor fails to list loans they took out from family and friends they could face a dismissal of their case.
Repaying Mom's Loan Before Bankruptcy Equals Trouble
Whatever you do, do not attempt to repay family/friend loans right before filing bankruptcy. While it is a natural inclination to want to repay these loans to the people you care about, doing so is illegal if done right before filing bankruptcy. When the bankruptcy court discovers that you repaid your friend or family member they will demand that the money is returned to the bankruptcy estate. Even if your loved one spent the cash, they must somehow come up with the cash and deliver it to the bankruptcy court. Failure to return the money to the bankruptcy court could cause legal problems for your loved ones. If you are considering bankruptcy and have already repaid family and friend loans, speak with your Dallas bankruptcy attorney about how you can reverse these illegal transfers.
Your Family Won't Hate You Because Of Bankruptcy
It's natural to fear that your family will be upset about a bankruptcy filing. But most logical people understand that if they lend money to someone who is financially struggling, there is a real possibility they won't get it back. Do your best to explain to loved ones that your bankruptcy filing is designed to get you on your feet financially and without it you may never recover. But whatever you do, do not promise to repay their loans after bankruptcy. Promising to repay debts after your discharge defeats the purpose of filing bankruptcy. Get a clean break from debt by letting family members know their loans will be wiped out in bankruptcy.