Personal Loan Question

[ManFromMunchkin]

Greetings:

I have some questions in regard to a personal loan I made recently.

About 2 weeks ago, I borrowed $5,000 from my sister. The terms of this loan are to pay her back a minimum of $100 per month, starting in January of 2007.

The purpose of this loan was to help me pay off two months of back rent, three months of car insurance premiums, two months of telephone bills, some overdue doctors' bills, and to have enough money left over to pay for some prescription medications and food until my disability check arrives at the end of the month.

This money was NOT intended to go towards my $30,000 in credit card debt.

A couple of days ago, I began to wonder if I should explore bankruptcy as a means out of my credit card debt. I looked up the median income for a single person in my state (Virginia). It appears that my gross income is roughly 50% of that amount. If I am correct, this may qualify me to apply for Chapter 7 bankruptcy.

Here are my questions:

***Would I be required to list my sister as a creditor, along with the $5,000 I borrowed?

***If the answer to the above question is "Yes", is there a rule saying that I cannot continue to pay her back $100 a month, beginning in January of 2007, as I had promised to do as per the terms of this personal loan?

Any information on the above would be deeply appreciated.

Thanks in advance.

Munchkin

[HHM]

***Would I be required to list my sister as a creditor, along with the $5,000 I borrowed?

***If the answer to the above question is "Yes", is there a rule saying that I cannot continue to pay her back $100 a month, beginning in January of 2007, as I had promised to do as per the terms of this personal loan?

Strictly speaking, you are required to list ALL your debts when you file bankruptcy.

Legally, since the debt would be discharged under a chapter 7, you would have no legal responsibility to pay the debt. But you can always voluntarily continue to pay.

[SinkingFast]

As HHM said, you would have to list your Sister on your BK petition. And that debt would be "Officially" discharged.

But there is no law that says you cannot voluntarily repay any Creditor. Family included.

In fact, you'd probably best off to file first and then pay. You have to disclose all payments to Insiders within the last year prior to filing. Insiders are family, friends, business associates, etc. All people you know personally/intimately.

If you have any payments to Insiders, the Trustee is gonna go back to those people and take the money back. Sis would have to give the Court any money you had paid to her.

Something to keep in mind if you're thinking about filing BK.

[Grace]

That is a really generous offer from your sister. If you only pay the minimum, it'll take over 4 years to pay off and no interest. It sounds like you did a good job of coming up with a good contract. Is it in writing? Do you know how your sister would react to your filing bankruptcy and discharging the debt? You can still pay her back, but if you stopped, she can't make you pay. In my experience, mixing money and family often results in disaster. If the relationship with your sister is important, tread carefully with this loan.

[9877donna]

If your going to file BK why not give your sister back her money? You can list all your back payments on your BK papers without having to go in debt with sis.
Donna