No paperwork loan from family?

[Adventura]

My family loaned the BF and I money (60K) to put towards the down payment on our house. Although there is no paperwork on this loan, other than the original wire from them to the escrow company and the receipts from our wires where we sent them payments (we have not made a payment since November '09), technically it is a loan against the house. If we ever sell the house, they are to be paid out of the proceeds--although even that is moot since we are underwater on our first mortgage. But whatever....

So where do I put this secured loan in my Chapter 7 schedules? I assumed it should go on the Schedule D with the other creditors holding secured claims, but with no paperwork perfecting this loan, apparently it is considered an unsecured loan and therefore should go on Schedule F. That seems strange to me. Does anyone have any wisdom on on how to list information about family loans?

[frogger]

You made the same mistake that a lot of us have made. Your parents made you an unsecured loan. Nothing strange about it, for it happens all the time to a lot of us.

It won't ever happen to me again. If I ever borrow money from family again, it will be secured in order to look after their best interests.

[Adventura]

OK, so I guess that means I need to list it on Schedule F as an unsecured loan. Well, at least I/we stopped paying them the same time that I stopped paying the CCs. At least the trustee cannot go after them as having received preferential payment.

Is there anything else the UST can do as regards this loan that I should warn my family about?

[justbroke]

Is there anything else the UST can do as regards this loan that I should warn my family about?

I concur with what frogger wrote. If you have "too much" equity and not enough exemptions to cover it... you could lose the home and the equity.

I hope you live in a State where the homestead exemptions are great. Otherwise, and I don't really wish it on you, I hope that you don't have too much equity.

[Adventura]

No worries on the equity front JB--the recent collapse in home values has left us with a house that is a few thousand dollars underwater on our first mortgage. The family loan, as well as all the money we made on the place we sold to buy this house--that is all down the tubes. Oh well--gotta live somewhere, right?

[ecsclb1724]

I believe any money to family members on a loan is preferential payment within the last 12 months it doesn't matter if you stopped paying them at the same time as your ccs. Tread carefully.

[Adventura]

Oh great.

Except....it has been well over a year since I personally made a payment. The loan was to the BF as well and he is not a part of my BK. Back when we were paying my family monthly, the money went to them via a wire from his bank account. And our accounts are totally separate. The last time a payment went to them from my account was in the fall of 2008.

In the interests of complete disclosure, I am certainly going to put the loan--and its particulars--on the Schedule F. And I will note the date of the last payment from me.

[ecsclb1724]

Although there is no paperwork on this loan, other than the original wire from them to the escrow company and the receipts from our wires where we sent them payments (we have not made a payment since November '09)

I guess I am confused then on this part... who did you make payments to from June-Nov 2009, because that would be in the last 12 months.

[Adventura]

The BF wired payments to my family from his own bank account. He was paying when I could not, and I am listing him as a creditor as well as I owe him for my share of these payments and a few other small loans.

[ecsclb1724]

interesting.... I'd be interested to know what the law says about this.

Technically, if he was making payments on your behalf I would still think it would qualify as an insider payment, but I'm not sure?