Is BORROWED money considered income ?
August 1st, 2006 by Questions
If during bankruptcy I BORROW $5,000 from a relative, would that money be considered income and \”surplus income\” would then occur?
One Response to “Is BORROWED money considered income ?”
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.)
You must be logged in to post a comment.
August 01, 2006 at 12:59 pm, A licensed trustee said:
Normally borrowed money is not considered income, but you may have to prove that the money is really a loan and not a gift. Proof that it is a loan might include a written agreement that includes repayment terms and interest. Further prof might include evidence that you are in fact repaying the loan.
Unfortunately, there have been cases where family and friends have tried to “help” people during a bankruptcy by giving them money. To avoid the windfall and surplus income rules the gifts have been called loans when in fact, there never was an expectation that the bankrupt would repay the gift. In these cases the bankrupt has been required to surrender the entire amount to their trustee – hardly the desired result of the gift in the first place.
If you have already filed bankruptcy and are expecting a family loan or gift, you may want to talk to your trustee first.