Can they tell family GIFT or LOAN?

[Moneypenny]

Hello,

I assume that the way that they tell if you got any gifts or loans from family is by looking at your banking statement. Let's say you are trying to pass a means test and a parent gave you 1000 dollar check in a gift or loan in the form of a check in recent months, or even to help you pay your BK lawyer. You cash it or deposit it and that shows up on your statement. So, you have to report it.

My question is: how can they tell if it is a gift or a loan? If it is a loan from your folks then I assume you would not have to count it as income in the means test, but report it in your list of creditors and debts. If it is a gift, then it would count on the means test. But since it is informal from family except that in the sense that it is a check, how can they know which it is, gift or loan?

Who decides? Is it just whatever you say it is, or whatever the courts say it is?

thanks!

MMP

[jessegirl]

What was it a gift or a loan? Nobody knows but you. Do you have to pay the money back? If so, then is a loan. If it was a gift and you do not have to pay it back then its a gift. If the trustee asks just tell them the truth.

[Moneypenny]

what i am asking is legally how do they know if it is a gift or a loan. i am not asking advice about what someone in that position should do, tell the truth or not, etc. i am asking what is the actual situation, is there any way for any trustee or court to know whether the item is a gift or a loan. To answer this question it would be necessary to have some actual knowledge of how this process works, rather than just advice.

or another way to put it, if you recieved a loan check from family and deposited it into your checking account, but there was no notation on the check saying it was a loan or gift, and no papers signed saying it was a loan or gift, and you put it in your list of debts and did not include it as income in a means test, can the trustee or court come back and say "we think that was a gift" and throw out your ch7 case because your income is now too high?

[lrprn]

The key here is whether you have a signed and witnessed agreement between your family member and yourself that the money you were given by your family member was indeed a loan. There's no other reliable way to prove to the court that the money in your account is really a loan, not a gift.

Do you have such an agreement?

[Moneypenny]

like i said, there is no signed agreement.

so therefore your answer is the burden of proof lies with me. I have to prove it is a loan, but they do not have to prove it is a gift.

so the question is, WILL they assume it is a gift and demand proof? Of course that cant be answered outright but experience might make some comment possible.

[Moneypenny]

also, i wonder do they really look over your bank statements and notice a 1K deposit and then start their assumptions that this is a gift.

thanks for your answers to all these questions!!

[hamburgervol]

also, i wonder do they really look over your bank statements and notice a 1K deposit and then start their assumptions that this is a gift.

thanks for your answers to all these questions!!

I think the question that may be asked is what did you do with that 1K. Did you pay bills with that gift? Buy food? Or buy a new Big Screen TV?

[momof3b1g]

I think the question that may be asked is what did you do with that 1K. Did you pay bills with that gift? Buy food? Or buy a new Big Screen TV?

Yes but unless you have detailed items on your statement. Most people will not have receipts from spending that $.
I have wondered the same question that the OP is asking. Do they just take your word it was a gift and do they consider it income? What hate is i have deposited money for the kids fundraisres etc and had to write a check. It was not my money. Or my kids give me money so they can order something online. I'd hate to think they question all those deposits. Most(if any) are not big so hopefully they don't question it.

[Moneypenny]

yeah i just realized that, in addition to all the other problems, i just found out my wife had a bank account that she let someone else put deposits in so that her daughter overseas could take funds out with an ATM card, but it was in my wifes name. So there are these monthly deposits, and the withdrawals are over in another country. That cant look good.

[pa308]

like i said, there is no signed agreement.

so therefore your answer is the burden of proof lies with me. I have to prove it is a loan, but they do not have to prove it is a gift.

so the question is, WILL they assume it is a gift and demand proof? Of course that cant be answered outright but experience might make some comment possible.

I had a situation kind of like this. I had a loan from my mother in law (mil going forward) for 1500. No paperwork but a loan none the less.

I did not want my mil included in our bk so my atty advised to wait so the deposit wasnt in my last 1 yr of bank statements. Fortunately for me I only had a couple months to wait and did so. Now that I'm discharged I have paid her back and have a happy mil

So not to ramble but part of my question to you is can you wait a little so the gift/loan is not in your account?

Lastly let me say this is not a stupid question. I worried over this one as well.

Hope this helps

[laurannm]

My hubby's parents gave us a gift in the amount $3500 about 3 months before filing. Our lawyer recommended we list them as creditors (which we did) so that it wouldn't count as income on the means test. At our 341 the trustee asked if they were his parents, but otherwise nothing was said and it was not an issue

[Moneypenny]

thats what i was wondering, if you list them as creditors whether there is any further investigation. I think few parents loan money to children and ask for a signed loan agreement! But i bet it depends on the trustee and the case.

[HHM]

Let me answer the original question like this.

If they put you under oath, what would you say?

If they put this family member under oath, what would they say?

The answer is simple, if both parties are willing to lie, then I suppose you can say whatever you want, but are both parties willing too?

[hamburgervol]

What if you deposit actual cash rather than a check into your bank acount?

[lrprn]

What if you deposit actual cash rather than a check into your bank acount?

Then your trustee could simply ask where the money came from. Then you're back to HHM's question - are you willing to risk lying under oath or not?