Status of loans made by bankrupt.
What is the status of a debtor to a bankrupt?
Example: I have assets of over 300K and I loan a friend 100,000 dollars in 2006 after writing up a formal agreement assigning his house as collateral. He agrees to repay the loan over a 10 year period at 8% interest.
A couple of years and a few bad investment decisions later I owe 200K and declare bankruptcy in 2008. What happens to the loan? Will my friend be forced to repay the remaining balance immediately? Will the loan itself be considered invalid?
The loan represents an asset of your estate. That means it will become the property of your bankruptcy and your trustee will be required to try and turn it into cash. They may agree to allow the debtor to simply continue to make payments, or what’s more likely, the trustee will “sell” the loan to a third party for cash.
Given the value of the loan, you may be able to offer your creditors a proposal instead of filing for bankruptcy. Use the links on this page to fibnd a trustee in your area and give them a call to discuss your options.