It is never easy to decide that it is time to file bankruptcy. Everyone’s situation is a little different, but for many people, one of the most common factors that holds them back is worrying about what will happen to any debt they owe to family or friends. You might want to protect those relationships and assume that paying them off right before filing, or leaving those debts out of the filing, is the best way to do so.
The bad news is that these workarounds can actually make things worse both for you and for the friends and family you wanted to protect. The good news is that you The Law Offices of Paul Y. Lee is here to help you. Keep reading for more information about this specific situation, or call us at 888-748-0025 for help with other bankruptcy information.
Do Not Leave the Debts Out of Your Filing
One of the first things not to do is to not leave out debts to friends or family in your bankruptcy filing. Why? Because you are required to list all debts on your bankruptcy schedules. When you submit them, you will be submitting them under penalty of perjury. It might seem strange, but leaving out a loan you owe to your brother could lead to serious consequences.
Do Not Neglect to Tell Friends and Family That You Are Filing Bankruptcy
It is important that you make sure to tell your friends or family that they are included in your bankruptcy. After you have filed, every creditor you have listed will get a notice from the bankruptcy court. This is generally not how someone wants their loved one to learn that your debt to them is included in your bankruptcy.
Do Not Try to Quickly Pay the Debt Before You File Bankruptcy
Your case is assigned to a trustee as soon as you file for bankruptcy. Part of that person’s job is to ensure that the case is fair to your creditors. This will involve them looking at your previous transactions, between 90 days’ worth and one year. If they see that anyone received a disproportionate payment, this can cause issues with your case.
What You Should Do
Now that we have covered what not to do, we should tell you what to do: list all debts on your bankruptcy, including those to friends and family. If you have a concern about the method or speed of paying them back, talk to your bankruptcy attorney to find the right solution. Trust us when we tell you that any method you use to try and “get around” the court is likely to result in negative consequences.