Family Loan

[Badgerz]

My wife and I owe her mother right around $6000. She would never come after us for it or anything but I do try to pay her little by little when I'm able. The last thing we need is for her to find out we're going BK. Just a pride thing I guess.

Should we list these payments as an expense? We definately do NOT want the debt included in our BK.

Thanks.

[FilingOnMyOwn]

My wife and I owe her mother right around $6000. She would never come after us for it or anything but I do try to pay her little by little when I'm able. The last thing we need is for her to find out we're going BK. Just a pride thing I guess.

Should we list these payments as an expense? We definately do NOT want the debt included in our BK.

Thanks.

Absolutely not. You should probably not even have mentioned them to another soul.

[bkfiler]

My wife and I owe her mother right around $6000. She would never come after us for it or anything but I do try to pay her little by little when I'm able. The last thing we need is for her to find out we're going BK. Just a pride thing I guess.

Should we list these payments as an expense? We definately do NOT want the debt included in our BK.

Thanks.

you have to list all debts on your creditor forms and list all payments on your expense forms. if you do not then it can be considered fraud.

if you tell the attorney one peep of that info then you will have to list it. also, if you list it on the expense form then you are going to have to list it on the creditor debt to discharge form as well.

however, if you realize that your loan to mom was just a bad dream and you have no idea what you were really speaking about then no reason to mention it ever

just remember that is trustee asks for bank records or check register and see it in there it might be a problem. just be aware of that and be ready to explain it in some fashion if you had to.

[StaciMM]

The best idea might be to plan to pay your MIL back after the BK. One thing that you will have to report-is if you gave money to family/friends for any personal loans. I believe anything more than $200 total in the year before BK is an issue. They will have to pay that to the BK court, so that it can be distributed among creditors.

Its called preferential payment to an insider.

[Badgerz]

What are you all going on about? We didn't get any money from family.

[edwards2]

Absolutely dont say anything because if you are paying your mother in law back any money it may be construed as "favoritism" to a creditor. You do run the risk of having a trustee examine your bank records and wonder what the check is for but unless you are paying her back a lot of money dont worry about it. We were in the same boat with a loan to my sister. We were paying her $100 a month. When we met with our attorney I simply forgot about it but when the trustee demanded more bank records I was a little nervous. She never said a word about the check...it could also be that my sister has a different last name than I do so maybe it wasnt so obvious. Anyway I was prepared to explain it away had I been questioned. My suggestion again is dont say anything about it.

[Badgerz]

It won't come up. I think I've paid her by check once for like $500. The other times it was $150 in cash here, $100 in cash there etc.

No worries. Thanks for the replies.

[bkfiler]

What are you all going on about? We didn't get any money from family.

looks like a brain eating virous is eating his memory quick.

[bkfiler]

The best idea might be to plan to pay your MIL back after the BK. One thing that you will have to report-is if you gave money to family/friends for any personal loans. I believe anything more than $200 total in the year before BK is an issue. They will have to pay that to the BK court, so that it can be distributed among creditors.

Its called preferential payment to an insider.

the rules are tricker then that. first the number is $600. and thats a total of all payments within the window.

tthe window for creditors is 90 days.

the window for insiders (family, friends, quido loan shark neigbor) is 1 year.

unless these changed with the new laws of course - which i dont think they did.

[Badgerz]

Oh I'll be paying her back for sure. Oweing cc companies money is one thing but I'll take a little more pride in paying mom in law back for sure.

[SinkingFast]

I think you need to consider a few things before you make a decision one way or the other about disclosure.

How long ago was the loan made??

Longer than 2 years ago would be of less concern than within the last year. Under the new law, everything in the last year before filing is subject to scrutiny. Attnys are asking us for the last 3 months bank statements. I've seen posters here have to come up with the last year's documentation for specific items requested by the Trustee.

Did you purchase or pay for ONE item/debt with the money?? Or, did you use it to purchase or pay several smaller items/debts??

If you paid one creditor or paid for a single item, larger purchase with the money, especially within the last year, that may draw attention. If you paid several creditors or bought lots of smaller items, that's less likely to draw attention.

Creditors and items that are titled by the State are conspicuous. Creditors report information to agencies. Although I'm seeing in our Credit Reports, the hospitals we've made payments to over the years did not report anything. I'm sure there are probably other Creditors that don't report as well. Things titled by the State, such as vehicles and boats, leave their own paper trail.

If you spent the money on smaller stuff, I wouldn't worry too much, myself. If you bought a car within the last year with the money, that would be a whole different matter.

[Badgerz]

I still don't think it would be an issue. The loans from my MIL add up to about $6000. The first was about 4 or 5 years ago. I had a tarnsmission go out and no money to fix it so she helped with that. Then another 1300 to help with school, also a few years ago. And then this past fall we sold our house and moved to another state. The house sold fairly quickly but to an FHA buyer. If you sell to an FHA buyer you agree to make a percentage donation to the Esther Foundation which acts as the buyers down payment. Blah, blah, blah.

Anyway, long story short, we needed $3500 to SELL our house in the end. Yeah, we got burned but there was no way to afford a mortgage payment in one state and rent in another. Wasn't happenin'. We had to get rid of the house quick. So my MIL bailed us out again.

[SinkingFast]

I still don't think it would be an issue. The loans from my MIL add up to about $6000. The first was about 4 or 5 years ago. I had a tarnsmission go out and no money to fix it so she helped with that. Then another 1300 to help with school, also a few years ago. And then this past fall we sold our house and moved to another state. The house sold fairly quickly but to an FHA buyer. If you sell to an FHA buyer you agree to make a percentage donation to the Esther Foundation which acts as the buyers down payment. Blah, blah, blah.

Anyway, long story short, we needed $3500 to SELL our house in the end. Yeah, we got burned but there was no way to afford a mortgage payment in one state and rent in another. Wasn't happenin'. We had to get rid of the house quick. So my MIL bailed us out again.

The older things, I wouldn't worry about at all. That's little stuff from a long time ago.

I hear ya about 2 homes. Hubby got laid off and was unemployed for 6-7 months. New job was outa state. We've been supporting 2 households for a year now. House on the market outa state, empty for the last 7 months. That's why we're here. Maxed out CC's trying to keep it all up. This is the second time we've been burned on a house deal. Having to sell to move on.

I think maybe you can cover the money for the sale of the house with a "gift letter" from your MIL. Monies from family for closing costs associated with FHA deals is quite common and understood. At least it is for buyers. Don't see why it wouldn't be the same for sellers too. Especially if you sold short to get out quick and move on. You don't even need to tell MIL the "gift letter" is for BK. Tell her you need it for income tax. It's that time of year. Be sure and back date the letter to when you sold and closed the house. You have CYA for the BK about where the funds came from and you can pay MIL back as you are able.

[StaciMM]

The $600 amount is for standard creditors, its $200 for 'insiders'.

Receiving money from family isn't an issue-regardless of where it went. Its paying family back, when you aren't able to pay other creditors, that is the preferential part.