Paying off Bankrupt Creditor?

[Badjim19]

I successfully completed a Chap 13 about a year ago. One of my creditors was a good friend whom I had purchased my house from. He had to "loan" me about 20k so I could secure the mortgage.

Now I fully understand that I have no legal obligation to him as this debt was discharged through the Chap 13 But, I was wondering if anyone knew the legal implications of Paying off a Bankrupt Creditor.
Could I get into legal trouble by doing so? Could other creditors if they found out come after me?

This may sound ridiculous, but I feel an ethical obligation since this person is almost like family.

[DebtEnder]

Once you are discharged you can pay off anyone you so choose. Also paying off a portion of a discharged debt does not mean you have to pay them the full amount if you don't otherwise want too. How this would affect them in a tax sense who knows. Depends if they ever wrote off the debt on a tax return.

Other creditors have no bearing after discharge the estate becomes yours again under your full control.

[Pandora]

what a nice thing to do - kudos to you for thinking of your friend. I dont believe there would be an issue since you've gotten a successful discharge (and congrats on completing your plan!). I'm sure others will chime in as well.

[justbroke]

Exactly. You can pay anyone you like, but you have no legal obligation. I wish my "non-bankrupt" friends would pay me back!

[Badjim19]

Thanks for all the reply's. I'd been worried about legal problems.

I'm not quite as nice as I seem. Paul (My friend) through ignorance, never filed a claim. All he would have had to do was send the trustee a copy of our promissory note. So I'm only going to pay him the difference.

I'm a little upset with him for not filing a claim, because as it turned out he'd have been paid almost half. He won't be happy when I tell him, but he's got to take some responsibility here too.

Thanks for the congrats Pandora!

And to anyone stressing about a 13 or just filing, You can do it! It's actually a big load off your shoulders just filing and getting the creditors off your back. Don't listen to the statistics, there may be some rough spots but it is doable!

[Pandora]

Thanks for all the reply's. I'd been worried about legal problems.

I'm not quite as nice as I seem. Paul (My friend) through ignorance, never filed a claim. All he would have had to do was send the trustee a copy of our promissory note. So I'm only going to pay him the difference.

I'm a little upset with him for not filing a claim, because as it turned out he'd have been paid almost half. He won't be happy when I tell him, but he's got to take some responsibility here too.

Thanks for the congrats Pandora!

And to anyone stressing about a 13 or just filing, You can do it! It's actually a big load off your shoulders just filing and getting the creditors off your back. Don't listen to the statistics, there may be some rough spots but it is doable!

Any reason why he didnt file a claim? Doesnt seem right especially if he wanted his money back :/ Is he not that worried about it or is he asking you for repayment? That would be my deciding factor I believe as for the past 5 years he could have gotten monies repaid - yet chose not to. Hmmm..... makes me wonder why especially since you had to count that $20K.

[forgotten]

Any reason why he didnt file a claim? Doesnt seem right especially if he wanted his money back :/ Is he not that worried about it or is he asking you for repayment? That would be my deciding factor I believe as for the past 5 years he could have gotten monies repaid - yet chose not to. Hmmm..... makes me wonder why especially since you had to count that $20K.

There would have needed to be a pretty solid repayment contract and history of verifiable payments for the friend to file a chapter 13 claim (and have it be accepted). My guess is that it was a "handshake loan". The trustee will object to any claim from a family member/friend, lots of people would try to make up fake loans so a good portion of their payment would go to their friend/family rather than real creditors.

[Pandora]

Forgotten

Good point - I agree 100%. I was under the assumption since the OP stated he listed his friend as a creditor and had a promissory note that maybe that would've sufficed. OP didnt note if payments were being made since the loan or how the note was written - I guess that makes all the difference to the trustee.

Guess the OP will have to update

[Badjim19]

Maybe I need to research this a little more. There were no payments made to friend. I could not afford any payments until after my car was paid off. The promissory note reflected this, I was to start paying in about 3 years. This was still within the time frame of my BK.

Friend didn't file a claim through ignorance, he's not the sharpest tack in the box. Also, no money ever changed hands. I bought his mothers house from him after she passed away. I could only get a mortgage for 20K less than the sale price (which was still below market value). So we decided to sign a promissory note for the 20K.

[jange]

There would have needed to be a pretty solid repayment contract and history of verifiable payments for the friend to file a chapter 13 claim (and have it be accepted). My guess is that it was a "handshake loan". The trustee will object to any claim from a family member/friend, lots of people would try to make up fake loans so a good portion of their payment would go to their friend/family rather than real creditors.

I included 2 family members in my plan. Both amounts owed were smaller, and I had to remind the 1 family member to sobmit a claim, but the trustee didn't question either and both are now being paid.

[tobee43]

I successfully completed a Chap 13 about a year ago. One of my creditors was a good friend whom I had purchased my house from. He had to "loan" me about 20k so I could secure the mortgage.

Now I fully understand that I have no legal obligation to him as this debt was discharged through the Chap 13 But, I was wondering if anyone knew the legal implications of Paying off a Bankrupt Creditor.
Could I get into legal trouble by doing so? Could other creditors if they found out come after me?

This may sound ridiculous, but I feel an ethical obligation since this person is almost like family.

i don't know if this will be just help...but along with our discharge which i see your was a 13 ...while ours was a 7, so i do not know if both would apply to this situation...i would it would.

we rec'd a "set of instructions" ....very interesting....stating you are now discharged and those listed on your petition except student loans...alimony.etc...etc....and those creditor can no longer pursue or attempt to solicit payment blah blah and more blah...but it also stated that if you chose on your own to pay anyone of those listed off, that is a personal decision....or something to that effect...i was scrambling this morning seeing if i could find the "exact" wording for you...but most likely dumped that piece of paper since all i cared about was the discharge and order of no asset distribution...which i filed away. but we did, in fact receive notice that it's our choice to pay...at least in this state.