Friend borrowed money then filed BK

[Guest]

About 45 days ago a "friend" that lives in AZ (I'm in NC) asked to borrow $3000. He said his money was all tied up in investments but they would be released in 21 days at which point he would pay me back. The 21 days came and he said the money wasn't released yet. I told him it was very important I was paid back immediately as it was a wire transfer from my business and I needed the money to pay the credit card that money was supposed to cover. After another 2 weeks he promised he was working on something and the funds would be released on the 9th. He said the money would be back in my account on the 10th of March. Needless to say I didn't get it. What I did get on the 11 though was a text that he filed chapter 13 and I would be paid back through the trustee.
It is my understanding that what he did is fraud. He lied to borrow the money, then lied about why he couldn't pay it back. What are my options? The first problem is it's only $3000 and I'm sure a lawyer would go through that so quickly it wouldn't be worth it. The other issue is the fact that he's in AZ and I'm in NC. What do I do?

[LadyInTheRed]

Non dischargeable debts are listed at 11 U.S. Code § 523.

Read the entire thing to decide for yourself, but this seems to be closest to your situation:

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; or

It sounds like the fraud you believe he committed was in the nature "a statement respecting the debtor’s or an insider’s financial condition". In that case, the statement would have to be in writing and you would have to prove the other elements listed. And, it would have to have been before you made the loan. Telling lies about why he couldn't pay does not make the debt non-dischargeable.

Yes, hiring an attorney would probably cost more than $3,000. You could consult with an attorney who represents creditors to find out if they think you have a chance of winning and what their fee would be.

You should receive a notice of the bankruptcy that I believe will include a proof of claim. Complete the proof of claim and file it with the court so that you can get paid through his Chap 13. If his Chap 13 plan does not pay 100% of unsecured claims, if he really is a friend, maybe he will pay you back outside of the Chap 13. But, you are not allowed to ask him to do that because that would be an attempt to collect on a debt which is a violation of the automatic stay during the BK and a violation of the permanent injunction after discharge. If your friend doesn't finish the Chap 13 and the debt is not discharged, then you will be free to collect. Keep in mind that Chapter 13 success rates are very low.

You are going to have to figure out a way to pay of your credit card without payment from your friend. The hazards of loaning money you don't have.

[justbroke]

Make sure that he actually included you in the Chapter 13 as an unsecured creditor. If you don't receive anything in 30 days about filing a claim, then he must have "forgot" to add you as an unsecured creditor. LITR wrote everything else you need to know. Unfortunately, these types of loans between friends are never in a writing and the "terms and conditions" of the loan are not clear other than "pay me back" in a certain period of time. Strong loan terms include things like interest rate, term, default, attorney fees and costs, and what happens when you default.

If your friend makes it to a discharge, then you could end up with just pennies on the dollar over a period of 3 to 5 years. You may not even receive a payment, as a general unsecured creditor, until years into the plan. (It's up to the Trustee as to when to pay unsecured creditors.)

As LITR suggests, this may not even make it to being a successfully discharged case, let alone making it to confirmation. Only about 55% of cases filed by an attorney make it to the all important confirmation. Even fewer make it to an actual discharge. So pay careful attention to what's going ton

VERY IMPORTANT: Do not call, email, write to, post on social media, send a message by carrier pigeon or otherwise attempt to collect that debt or harass your friend that filed Bankruptcy! You could be out a lot more money by not adhering to the automatic stay. Because he told you that he filed, you could wait for the Notice of Bankruptcy, but you have "constructive" notice! You may be angry or disappointed, but don't try to call him regarding this matter (or otherwise make any contact or tell other people about how he didn't pay you). The stay is the hallmark of the bankruptcy code and the Judges don't take stay violations lightly.