Can I Pay Back My Loved Ones Before I File Bankruptcy?
As bills rise and wages fail to keep up, it is understandable if you decide to turn to friends and family for help in an attempt to make ends meet. In many cases, loved ones are willing to offer financial support when they see you struggling to overcome challenges and that the funds are genuinely needed. For many people who are struggling, this help unfortunately isn’t enough to halt serious financial issues. If you have borrowed money from any family members or friends, you may be tempted to try to pay them back first before you file for bankruptcy. However, as discussed below, this might not be the best idea and you should reach out to an experienced bankruptcy legal team if you have any question about repaying your loved one.
The Benefits of Bankruptcy
Bankruptcy is a legal process that makes most debt go away including money owed to friends and family members. This is a good thing as borrowers are sometimes surprised to discover that the same loved ones who offered loans can use some of the same harassing tactics as other creditors when it is revealed that you simply don’t have the income to pay back everyone. Even those who care about you the most can badger you with phone calls, text messages, and other methods in an attempt to reach you and make you pay. Bankruptcy can be an invaluable solution that forces your family and friends to immediately stop their collection efforts just like any other creditor or debt collector.
Paying Back Your Loved Ones
The last thing you want is to see someone you care about suffer financially because of your inability to pay back your debts. There is therefore no advantage in paying a family member or friend back a significant amount of funds shortly before you file for bankruptcy relief. Importantly, all creditors should be treated fairly within a bankruptcy case. You do not want to give the court the impression that you were treating that particular family member, who is actually a creditor, better than other similarly situated creditors. When a preferential payment occurs, the creditor can actually be forced by the court to put the funds paid by the debtor back into the bankruptcy estate for distribution to other creditors. That means that your loved one could actually have to forfeit payments you made in the year prior to filing for your bankruptcy which could end up leaving them in a worse position altogether.
We Are the Legal Team You Can Depend On
Facing the prospect of an imminent bankruptcy can be an intimidating process no matter how many benefits it may come with. Like the bulk of borrowers in a similar situation, you will likely find it helpful to have the help of a legal team that is qualified to handle your bankruptcy case. As the Plantation bankruptcy attorneys at Nowack & Olson, PLLC, we are here to walk you through the bankruptcy process every step of the way no matter how complex your situation is. We have over 40 years of combined experience helping Floridians get out of debt and build credit. Contact us today for a free case evaluation to see what we can do to help you get started with the bankruptcy process.