Loans from family count as income

[PVS]

Regarding disclosure of income prior to filing, do the loans I've received from family members count as income, and can they cause me to be over income limit for chpt 7?

[shabam]

I do not believe so but they are considered an insider. Which means that any payments you made to them within the year, could possible have to be paid back to the trustee.

[AngelinaCat]

As long as you are making payments of under $600.00 to the family members AND are making similar amount payments to your other creditors, you will be okay as far as 'preferrential' and 'insider' payments go. It is when you are paying one or two creditors and none of the others, then it becomes a 'preferrential' issue.

When the creditor being paid is a family member or good friend, then it becomes an 'insider' issue as well.

[PVS]

Thanks. My minimum payments on some cc and auto loans are higher than that number now unfortunately.

[Chowder]

Regarding disclosure of income prior to filing, do the loans I've received from family members count as income, and can they cause me to be over income limit for chpt 7?

Repayments aside. If the loans are regular, say monthly, they will most likely be considered income. Whether that pushes you over median we can't say without more info.

You may want to consider having family members pay bills directly, or take you shopping for necessities. It's better to not have the funds pass through your account(s).

[lrprn]

When you file bk, all loans (including those from family members) must be listed on your forms.

Repaying a legitimate loan that happened to be from a family member is not automatically subject to the trustee getting that money back UNLESS the filer paid the family member more than they would get in a Ch 7 and also did *not* pay all their other creditors equally while paying the family member.

Also the court has the right to look back at payments made to insiders (including family members) for a year before filing, not just the last 90 days.

[dakota112]

Gifts income?

Is it considered income if your family gives you cash and you buy food or go out to eat out to a movie with it but not on a regular basis like monthly? If not a loan to be paid back and uncle sam isn't getting paid income tax why would funds not earned and less than 13 thou a year be looked at as income? My take on this is they want you to live for 6months under the median , not get help from anyone and suffer or go homeless if you have to. It seems ridiculous. Just my opinion on this whole process.

[mhman]

If there was a payment to a family member 5 months before BK filing, what would happen for this "insider" issue?

My attorney recommended me to pay a credit union for couple of months more since there was a cash advance in May. It would be a "preferential" issue.

What would happen? There was a similar question in "Sticky" thread but nobody clearly answered on it.

Anybody knows clearly on this "preferential" and "insider" issue? Is this a big problem during BK?

[leena]

A loan is debt, not income. Regular gifts are income, such as set monthly amounts given to you.

[backtoschool]

Is it considered income if your family gives you cash and you buy food or go out to eat out to a movie with it but not on a regular basis like monthly? If not a loan to be paid back and uncle sam isn't getting paid income tax why would funds not earned and less than 13 thou a year be looked at as income? My take on this is they want you to live for 6months under the median , not get help from anyone and suffer or go homeless if you have to. It seems ridiculous. Just my opinion on this whole process.

This is a tricky issue and has been debated here before. It is at the discretion of the trustee. Small cash gifts from family members will not been seen as income by the trustee most likely, but a large cash gift (ie over a $1,000) will. And the amounts that are seen as income are totally up to the trustee as well. The advice usually given on this board is to have family members directly pay your bills instead of giving you the cash.

I had several large cash gifts from family members and my boyfriend within six months of filing bankruptcy. The trustee asked me about each one, and if I had been close to the median income (i was way under) I probably would have had a problem with the trustee. The trustee was interested in two things when he asked me about the large (over $1,000) cash gifts.

1. Is it a loan (I said no. It was a gift)
2. What was it used for. (I broke down what the cash was used for.)

As long as the gift is used for living expenses or something necessary, it will probably not be considered income if it is not a huge amount of money, but again, this varies by district and even by trustee.

[Chowder]

This is a tricky issue and has been debated here before. It is at the discretion of the trustee.

I'd say when it comes to cash "loans" from family it's up to the discretion of the debtor. Without a paper trail, the amount would have to be quite significant to be noticeable.

The question of family loans was one of my consultation questions when I was Attorney shopping. Four Attorneys, and four answers of no when I asked if a family loan should be included. In my case, the reason was, that since the loan, secured by collateral or not, was not filed with the proper state agencies.

JMO. Lots of times the money that passes between family members is called a loan to make the recipient feel better about taking the gift.

[HHM]

Loans are loans, so long as it is legitimate loan, it is not income. (no loans are income).

[drowningNdebt]

what about a situation where your family is actually paying for your living expenses. EX: gym, car payment, cell phone, living at home, food, etc and it all goes out of their bank or onto their credit card. Yes, I'm fortunate enough to have this comfort in these bad times. My income is $0 and unemployed. Just moved back home. However, when and if I become employed I will resume all expenses. If it counts as income it still zeros out. Just curious what I tell the trustee when they ask me at my 341. "I'm living at home trying to get back on my feet and my parents are helping me until I find a job" That's the truth.

[keepmine]

what about a situation where your family is actually paying for your living expenses. EX: gym, car payment, cell phone, living at home, food, etc and it all goes out of their bank or onto their credit card. Yes, I'm fortunate enough to have this comfort in these bad times. My income is $0 and unemployed. Just moved back home. However, when and if I become employed I will resume all expenses. If it counts as income it still zeros out. Just curious what I tell the trustee when they ask me at my 341. "I'm living at home trying to get back on my feet and my parents are helping me until I find a job" That's the truth.

If that's the truth then, tell that to the trustee. You won't be the first person living at home and being supported by family while you look for work. Nothing wrong with help from family.

[backtoschool]

I'd say when it comes to cash "loans" from family it's up to the discretion of the debtor. Without a paper trail, the amount would have to be quite significant to be noticeable.

The question of family loans was one of my consultation questions when I was Attorney shopping. Four Attorneys, and four answers of no when I asked if a family loan should be included. In my case, the reason was, that since the loan, secured by collateral or not, was not filed with the proper state agencies.

JMO. Lots of times the money that passes between family members is called a loan to make the recipient feel better about taking the gift.

I agree, but actually I was talking about gifts that did not have to be paid back. I was not talking about loans. I agree that family will call the money a "loan" but in reality it is a gift, but the trustees often see a big difference because they are looking for preferential payments to family members.