Paying Back Friends or Relatives Before Filing

I can pay back Granny before I file, can’t I?

No, and Don’t Borrow Money from Relatives.

Remember, you’re likely not going to be able to “borrow” your way out of debt at this point. If you’re reading this and considering borrowing money from relatives, it’s probably for the purpose of paying other debt that isn’t getting paid, right? Borrowing money from relatives usually causes strain and stress on family relationships, and only leads to hard feelings down the road, if not paid back promptly. If your uncle is Bill Gates, you can ignore most of this advice of course. Generally speaking, though, it’s the old saying of not mixing business with family, neither should you do it with loans you cannot currently payback.  Simply put, you shouldn’t pay back friends or relatives before filing bankruptcy.

Debtor –   I paid my grandma, cause well, she’s my grandma
Bank –   “That’s not fair, and we don’t care if she is his grandma”

Debtor – “But she’s my grandma”
Trustee – “Great, tell her to give it to me”

In the context of Missouri bankruptcy, borrowing from relatives causes significant issues if you have or are planning to pay those relatives back within a year of filing the bankruptcy. Simply put, if you are paying back Grandma, but not Mastercard, you’re going to have problems. If you did pay back Grandma, the guy from Mastercard is not the only one that’s going to have something to say. Under the Federal Bankruptcy Code, the trustee can recover such payments if they have been made within the past year. We don’t want Grandma getting sued now, do we?  Be sure to speak with your attorney to avoid any problems.

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Guss Markwell

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