Filing bankruptcy on debts owed to family and friends is a very emotionally charged issued. It hurts to file bankruptcy and not repay your loved ones especially if they loaned you money they could not afford to just give away. This is why we hear so many stories about debtors failing to include in their bankruptcy filing debts owed to family and friends or even worse, transferring cash and assets to family and friends right before they file bankruptcy. We know it is hard to include your friends and family in your bankruptcy filing and even harder to not repay them after you have discharged the debt and continued on with your post-bankruptcy life; but doing so is essential to your financial well being. Let’s take a look at why you should not promise to repay family and friends after bankruptcy:
- If you filed bankruptcy because you were unable to pay your debts, it is unlikely that you will be able to repay those debts after your debts are discharged. Promising to repay loved ones after bankruptcy is unfair to them because it is a promise that you most likely won’t be able to keep. The reality is that if you are making the same about of income after bankruptcy as you were before bankruptcy you are not going to have enough extra to make payments on those discharged debts.
- Bankruptcy is about debt forgiveness and that includes debts owed to family and friends. People file bankruptcy because they need their debts to be forgiven. If you tell your friends and family that you are going to repay them after bankruptcy you are essentially saying that you really don’t need debt forgiveness. Make it clear to your family and friends that you really do need debt forgiveness and let them know that while you wish you could repay them, you simply cannot.
- By promising to repay your friends and family after bankruptcy you are in essence reaffirming your debt agreement with them. Let’s clarify, you are not legally reaffirming your debt agreement and they would not be able to sue you in court to force you to repay a debt that was discharged in bankruptcy; but they could emotionally hold that promise over your head. We know that there are some feelings of guilt surrounding discharging a loved one’s debt in bankruptcy; but debtors who promise to repay those discharged debts are setting themselves up for even more guilt and stress when they are unable to keep their promise in the future.