When people experience financial hardship, their close family members and friends might offer to try to help. However, if you borrowed money from those closest to you, and you still could not get ahead, you might need to file for Chapter 7 bankruptcy.
The bankruptcy petition requires that you list all of your debts – and this does mean ALL. This means that you need to inform the court of your loans from friends or family when you initiate your bankruptcy case.
Bankruptcy laws aim to treat creditors properly, and the law counts loved ones as creditors when they loaned you money that you could not repay. This can cause a serious problem for you, however, as the bankruptcy court might discharge your debt as part of your case resolution, which means you legally do not have the obligation to repay the debt. This can cause a rift in relationships in many situations.
You might be tempted to try to avoid potential awkwardness by omitting these debts from your bankruptcy petition. If the court finds out about the debt, it can have serious consequences, including possibly being denied a discharge of the rest of your debts.
It is best to discuss your plans to file for bankruptcy with your loved one. In addition, even if the debt is technically discharged, you can still choose to pay them back if you wish. The only difference would be that they could not file a lawsuit against you to seek payment for the debt following the discharge.
Speak with a Memphis Bankruptcy Lawyer
At Hurst Law Firm, P.A., we know that you have a unique situation, and you might likely have a lot of questions. We are here to answer those questions, so please contact us online or call 901.725.1000 to consult with a Memphis bankruptcy attorney today.