Can I Not List Loan from Family?

[ApresMoi]

I got a small loan (1K) from a family member in October. When I got the loan, I did not know I would be filing for BK/Ch. 7. I will shortly have the funds to repay them. During my atty consult, I was told it's not a good idea to do that as a trustee may try to recover the payment.

I do not want this family member to know I filed for BK. Can I leave this 'debt' off my list of creditors? Wouldn't they be notified of my BK if they are on that list?

There is no time limit on when I have to repay the loan; it's understood that I will do so when I am able.

Thanks for any replies.

[AngelinaCatHub]

I got a small loan (1K) from a family member in October. When I got the loan, I did not know I would be filing for BK/Ch. 7. I will shortly have the funds to repay them. During my atty consult, I was told it's not a good idea to do that as a trustee may try to recover the payment.

I do not want this family member to know I filed for BK. Can I leave this 'debt' off my list of creditors? Wouldn't they be notified of my BK if they are on that list?

There is no time limit on when I have to repay the loan; it's understood that I will do so when I am able.

Thanks for any replies.

If you do not list them, you will be committing perjury, first on the forms for purposely leaving it not listed, then at your 341 when on your oath you will be asked if this is complete and accurate and that you signed it and read it.

Understand, when you list it, you are asking the bk Court to discharge that debt and yes the loan will be listed and mailed. This does not that you cannot pay this debt back, but only after your discharge and better if after it is closed also. I would attempt to explain this to your family member as, if you did not need the money, you would not be bk, so the loan would be explainable. Keep everything up front as people have a way of finding out Public Record. I would also explain to that person that you will pay them but it has to be after bk is over.

About your other question, the C7 book from Nolo Press for about 17 bucks will tell you all about this stuff. It's a good investment. 'Hub

[ApresMoi]

If you do not list them, you will be committing perjury, first on the forms for purposely leaving it not listed, then at your 341 when on your oath you will be asked if this is complete and accurate and that you signed it and read it.

Understand, when you list it, you are asking the bk Court to discharge that debt and yes the loan will be listed and mailed. This does not that you cannot pay this debt back, but only after your discharge and better if after it is closed also. I would attempt to explain this to your family member as, if you did not need the money, you would not be bk, so the loan would be explainable. Keep everything up front as people have a way of finding out Public Record. I would also explain to that person that you will pay them but it has to be after bk is over.

About your other question, the C7 book from Nolo Press for about 17 bucks will tell you all about this stuff. It's a good investment. 'Hub

Ok, thanks. Looks like they have to know about it then. I did get the Nolo book a few nights ago, and will reread the section on expenses to see what I can figure out. If I knew for sure I was going to hire an attorney, I would leave it up to him/her. But at this point, I haven't ruled out filing pro se.

[lrprn]

I got a small loan (1K) from a family member in October. When I got the loan, I did not know I would be filing for BK/Ch. 7. I will shortly have the funds to repay them. During my atty consult, I was told it's not a good idea to do that as a trustee may try to recover the payment.

The attorney is absolutely correct. DO NOT repay the relative now if you intend to file within the next year. Insider payments can be undone by the trustee going back a full calendar year, even more.

I do not want this family member to know I filed for BK. Can I leave this 'debt' off my list of creditors?

You said the money was a loan. Did you actually sign a legal written agreement to repay the money, or was it a "handshake" verbal deal?

Wouldn't they be notified of my BK if they are on that list?

Yes, the family member will be notified if you include the loan on your filing forms.

There is no time limit on when I have to repay the loan; it's understood that I will do so when I am able.

If there's no legal signed loan agreement and no expectation that the money will be repaid within a certain time frame, then you could consider the loan a temporary gift. There's no need to list a gift on your filing forms. Then "re-gift" $1K back to your relative in 3-4 months once your Ch 7 is discharged. Discuss this approach with your lawyer, and only do it if he/she says it's ok.

If there is a written agreement with your relative, then you are obligated to include the loan on your filing forms. ALL debt must be listed, no exceptions. To deliberately leave off a debt is committing bankruptcy fraud.

[mtbc]

Hmmm, would a "gift" approach affect 2009 taxes as taxable income? (And theirs in 2010, when you made a gift back.) I really don't know, does anybody else?

For what it's worth, we included a $1,000 loan from my mother in law as part of our unsecured debt, and included her on the creditor matrix!

[BnkrptcyLwyr]

There is no problem in listing debts owed to family members. In fact, you are required to list all your debts, so it *must* be listed.

And while technically the debt will be discharged just like any other ... as 'Hub pointed out, nothing prevents the voluntary repayment to your family afterwards.

[jribe]

while the answers by people on this thread are technically correct- that doesn't mean you have to go by this..

There are many lawyers who would say such a small "loan" that is undocumented and was from a family member, may have just been a "gift".

If there is no way to prove this loan happened- don't list it if you don't want to. And i don't think many would volunteer this small sum on their taxes either (even though it is the right thing to do).

This is absolutely your choice.

I got a small loan (1K) from a family member in October. When I got the loan, I did not know I would be filing for BK/Ch. 7. I will shortly have the funds to repay them. During my atty consult, I was told it's not a good idea to do that as a trustee may try to recover the payment.

I do not want this family member to know I filed for BK. Can I leave this 'debt' off my list of creditors? Wouldn't they be notified of my BK if they are on that list?

There is no time limit on when I have to repay the loan; it's understood that I will do so when I am able.

Thanks for any replies.

[Stilltheone]

There is no problem in listing debts owed to family members. In fact, you are required to list all your debts, so it *must* be listed.

And while technically the debt will be discharged just like any other ... as 'Hub pointed out, nothing prevents the voluntary repayment to your family afterwards.

We had a loan from my MIL that we had to list. She made us sign legal papers a few months before we filed.

Yes, you can choose to repay them back. (We never did, hence the "tension" in the family!)

[ApresMoi]

while the answers by people on this thread are technically correct- that doesn't mean you have to go by this..

There are many lawyers who would say such a small "loan" that is undocumented and was from a family member, may have just been a "gift".

If there is no way to prove this loan happened- don't list it if you don't want to. And i don't think many would volunteer this small sum on their taxes either (even though it is the right thing to do).

This is absolutely your choice.

Oh, ok. I will bring it up with the attorney. I have given up on the notion of pro se. Yes, I think I could do it (pro se), but I would prefer the protection (if you will) of representation. If I'd started the bankruptcy educational process months ago, then pro se maybe would have been an option. But I am three months late on payments, and am running out of time. Everyone says 'they won't sue for a year' etc., but I am not counting on that. Read the other day someone was sued three and one-half months after their first missed payment. She owed in the 60K range, and I owe less than half of that, but still, you never know...it can happen. No thanks.

[ApresMoi]

The attorney is absolutely correct. DO NOT repay the relative now if you intend to file within the next year. Insider payments can be undone by the trustee going back a full calendar year, even more.

You said the money was a loan. Did you actually sign a legal written agreement to repay the money, or was it a "handshake" verbal deal?

Yes, the family member will be notified if you include the loan on your filing forms.

If there's no legal signed loan agreement and no expectation that the money will be repaid within a certain time frame, then you could consider the loan a temporary gift. There's no need to list a gift on your filing forms. Then "re-gift" $1K back to your relative in 3-4 months once your Ch 7 is discharged. Discuss this approach with your lawyer, and only do it if he/she says it's ok.

If there is a written agreement with your relative, then you are obligated to include the loan on your filing forms. ALL debt must be listed, no exceptions. To deliberately leave off a debt is committing bankruptcy fraud.

***********

Good answers. Thanks. I am defintely not interested in committing bankruptcy fraud! I will disclose to the attorney and see what he says. It was an informal arrangement. I just collected a loan that I made to another family member that was outstanding for seven years! And I didn't ask for interest either. It's not a legal arrangement by any stretch.

[mtbc]

This is a bit of a tangent, but: for larger loans that are interest free over a few years, do be careful in case you get audited by the IRS someday and they see the loan deposit. My impression is that a below-market-rate loan has that "discounted interest" as some kind of taxable gain for the borrower. I'd guess nobody'd notice or care for small amounts though.

[music12]

i think it's a little extreme to call this bk fraud. i'm with lrprn. as long as you don't pay this relative back before the bk, you are harming nobody by not disclosing it. in fact, the only potential harm would come to the very family member who loaned you the money, because if you become an asset case, that family member would not get any payments from your estate. so not listing the family member is actually better for all other creditors, and makes no difference to the trustee.

i think bk fraud refers to cases that are truly fraudulent attempts to game the system. this just isn't.

[pa308]

Sounds like a gift to me

[ChaseDidThis]

I agree with music12, this is just family helping family. How about this, pull your credit report and see if that relative made an inquiry about you before the "Loan" was given. I seriously doubt it.

[ChaseDidThis]

I agree with music12, this is just family helping family. How about this, pull your credit report and see if that relative made an inquiry about you before the "Loan" was given. I seriously doubt it.