Loan from family member

[JimmyNeutron]

Hi,
My wife and I been getting $300/month for about a year now from her sister as a loan to help w/ living expenses.

How does the court see a family loan? Should I tell my wife's sister to stop w/ the $300 till Chapter 7 is completed? After Chapter 7, my wife and I shouldn't need the loan anymore since we'll be moving back to an area where there are plenty of jobs for me to find and can began repaying my wife's sister back.

Thank You in advance!

State: California

[justbroke]

Is it a loan? Or is it just a repeating gift? There's a difference. If it's a repeating gift, then it is income. If it's a loan, then your relatives are an unsecured creditor just like your MasterCard and Visa. If they are unsecured (or even secured) you'd list them in your Chapter 7 as such.

When the Chapter 7 discharges, you will no longer be responsible for repaying them, legally. If you choose to pay them back after the Chapter 7 is discharged, that's up to you.

The real question is,... if it's a loan, what are the terms? Was there any reasonable expectation that you'd pay them back? Many times, they are not per se loans, but actually repeating gifts. I just hope that your attorney can classify it as a loan and it doesn't end up being counted as income.

[JimmyNeutron]

It's my wife's sister and we have every intentions of paying her back. If it was a bank, than that's different, but this is my wife's sister.


Thanks for your help!

[justbroke]

It doesn't matter what your intent is. It matters what the agreement is, and what your sister-in-law's expectation is. However, I wouldn't worry about this. Your attorney will deal with it the appropriate way.

And, your sister-in-law (SIL) making a loan can be formed with an agreement no different than a Bank. Actually the preferred way to loan money to someone, and how banks do it, is to have them sign a promissory note. Some call the promissory note, the contract. This explains the terms and solidifies the agreement. Just don't think of your SIL any different than a bank. Your agreement may be verbal, but if your sister didn't say "this is a loan and I want payments of XXX over this term" then it's not a loan.

Please be fully aware that I'm not implying that it's not a loan. Just trying to let you understand that she's either an unsecured creditor -- just like a bank without a lien on some property to secure the loan -- or the money was a repeating gift. Since you said it's a loan and you made an agreement to pay it back, then your SIL is an unsecured creditor.