Secured loan from insider

[Pascal666]

My mother lost her job a couple years ago. She is now deep in debt, hasn't been able to make credit card payments for about a year, and I expect her to file for bankruptcy at some point in the next year to get creditors off her back.

She has a small home based business selling trinkets of her own design at swap meets and online. She has patents pending on a couple of her designs, as well as inventory. Her business puts food on the table and she is worried about the bankruptcy trustee taking her intellectual property and inventory as part of the bankruptcy.

She just asked me to loan her some money so she can go back to school and start a new career. I know I'll never see the money again, but I plan to loan it to her regardless. I was just wondering if maybe I couldn't take this opportunity to help position her for the bankruptcy better.

If I understand correctly, the bankruptcy trustee has no rights to fully encumbered secured property. If I loan my mother the money she wants, and structure the loan as secured by her business's intellectual property and inventory, would this accomplish my goal? If so, is a simple agreement via email to this effect sufficient to create a secured loan in regards to a bankruptcy or what exactly do I need to do? Note that the secured loan only has to stand up for purposes of the bankruptcy, I would never attempt to assert any rights to the property outside of the bankruptcy.

Any other suggestions?

Thank you in advance for any assistance you can provide.

[justbroke]

The Trustee can get at encumbered secured property if the lien isn't properly perfected. If you lien her inventory or patents, you'd going to need more than an e-mail. You will probably need a UCC-1 and it will need to be PROPERLY recorded and the recording fees paid. It also has to be done exactly correct under the laws for your State (although most follow the Uniform Commercial Code).