Claiming bankruptcy – how does that affect family loans

November 11th, 2011 by Questions

I owe my brother $5000 and am paying him back $200 per month. I borrowed it a few months ago to pay off a loan that had a payment per month of $340 – thereby lowering that repayments by $140. However I am still fighting with additional $650 of debt repayments per month.
If I file for bankruptcy, how does that affect the money I owe my brother? I want to make sure I pay him back in full as he was generous to help me out in the first place.

Thank you.

Posted from: British Columbia

Questions

One Response to “Claiming bankruptcy – how does that affect family loans”



, A licensed trustee said:

Family loans are treated no differently than commercial loans – a debt is a debt is a debt…

If you decide to file a consumer proposal or bankruptcy, the family loan should be disclosed and listed just like any/all of your other debts. During the procedure you are not permitted to make payments towards this debt (or any of your others). If you do it is called a preference and your other creditors have the right to argue that they should be entitled to payments too – or whatever you pay towards the family loan may be seized by the Court. Either way, it’s a mess you don’t want to have to deal with…

On a more positive note, once you have completed the proposal or been discharged from bankruptcy you are free to repay the family loan if you want to – you simply have to wait until whatever procedure you decide upon is over BEFORE you make any payments.

Please post a follow up comment below:

(Note: comments are reviewed by moderators and then posted after approval. In addition, due to high volume some of the comments might not be posted.)