Need help on a situation causing me stress...

[trader19]

Guys, I am a month away from filing C7. I am looking to discharge about $125,000 in debt. However, during my tailspin into financial hell, I also borrowed $20,000 from my brother. He started to get into financial trouble as well and when I came into a bit of cash, I gave it to him over the last few months. I think I gave him just over $4,000 total spread over 4 CASH payments. I have not told my lawyer this and I am very nervous about how the Trustee will view me. Will he think... "if you did it for your brother, how about other people?"

My questions are...

1. What should I do?
2. Can my brother surrender the money I gave him back over to me? To the trustee? How would that work?
3. I owe the IRS money. If that money is turned over, would it go to them anyway?

Would it be okay if i had my brother give me back cash in the amount I gave him, and then just deposit it back into my account and then not bring it up to my lawyer or trustee? I mean, couldn't I just say, IF ASKED, that he was holding it for me as an emergency fund and after things settled down I felt comfortable to deposit it into my account?

Your help is greatly, greatly appreciated. I am losing sleep over this.

[Floridagail]

What a great brother you have. First be truthful with your attorney about this loan and repayment. How long ago were the payments?

If you are not being sued right now. I would put off filing and let more time go by. If the payments were made in last 90 days , then the trustee could ask for them back.

[keepmine]

I'd tell your lawyer about this. No way I'd lie or attempt to mislead. You're trying to discharge $125K. Don't let $4k get in the way.

[keepmine]

. If the payments were made in last 90 days , then the trustee could ask for them back

His brother is an insider. Payments made within a year of filing to an insider could be considered property of the bk estate.

[trader19]

I appreciate the quick responses. I definitely don't want to let $4,000 keep me from discharging $125,000.

So, I ask this...

Can I just have my brother return the cash to me and then I use a wild card to protect it or spend it on living expenses?

If I have him return it... since it was cash... would I then have to disclose that I made payments to him in the first place? I am a school teacher and will have no income over the summer months. Couldn't it be argued that he was just holding it for me for the incomeless summer months in order to keep me from spending it. And now he is returning it???

[Floridagail]

First of all you still owe your brother . It is a listed debt. It has to be included in the bankruptcy.
It is best to be truthful and let your attorney figure out how to handle it. After discharge you can pay anyone back you want. So please discuss with your attorney.

I know of a case where the person lied about what was put in their petition, and She agreed to dismiss rather than be charged with fraud. the case got dismissed and She was told she could never file bankruptcy on any of the debts in that petition again. I forgot the legal terms. She tried to hide cash she received.

[Pjmax]

Please discuss this with your attorney. The folks here are knowledgeable for sure, but only your attorney will know how to best handle it in your area, with your TT. I don't understand why you don't wish to disclose this to your attorney. He's there for you, tell him everything before you take any more steps. It may be fine, but he might advise you to wait a few months before filing.

[trader19]

I am just nervous to talk to him about it because I didn't disclose it when he asked if I made any payments. Why would it be bad if I just went and got the cash back and then disclose the cash? I am not trying to hide the cash. I am just going to claim he was holding it for me.

[Charlie777]

Your attorney is on your side, andanything you tell him is protected by attorney client privilege. You MUST be completely honest with your attorney, tell him about this and consider his advice.

[TRfromillino]

It's better for you to tell your lawyer the truth. Take the emotion of being nervous out of it. One always gets caught up in lies. You cannot manipulate your situation by adding lies to lies. Much of it depends on when you made the payments too. It might not even be much of an issue. You didn't do anything wrong by paying your brother back, so don't make it more complicated than you already think it is. If you're worried about income for the summer, maybe you could find some interim work, tutoring etc.

[paulsk]

What stage are you at? Did you file already?

[Pjmax]

I am just nervous to talk to him about it because I didn't disclose it when he asked if I made any payments. Why would it be bad if I just went and got the cash back and then disclose the cash? I am not trying to hide the cash. I am just going to claim he was holding it for me.

Saying you are not trying to hide cash does not change the fact that it may APPEAR that way. You are making a big mistake not telling your attorney everything. Believe me, he's heard much worse, and he will advise you on how not to get in trouble, but he can't do that if you are not totally honest.

[despritfreya]

Advice I would give my client:

1. Disclose, disclose, disclose - questions 3 and 10 of the Statement of Financial Affairs. And. . . yes, you must tell your attny.

2. Forget about getting the $$ back even if you can exempt the cash. Trustee will go after brother anyway as he will allege that the funds you are now holding were the result of a new loan, not a return of the $$ you paid back to the brother within the 1 year prior to filing.

3. If your brother does not have the financial ability to pay your estate back for the insider preference, you cut a deal with the Trustee to pay it back over time. Most Trustees will allow payments between 6 months and 1 year.

4. To the extent available, the funds will be paid to your priority creditors, after payment of the Trustee's fee therefore the funds will eventually be used to pay down your priority taxes - so kicking in $$ will help you to the extent the taxes are paid.

Des.

[mknolan]

Your attorney will not judge you - be honest! You must disclose everything!! You'll feel better that you did!!