Borrowing money from friends and relatives is a common way to try to get out of debt. But when you start seriously considering filing for Chapter 7 bankruptcy, it's only natural to want to pay back those funds. However, as well-intentioned as the move might be, it can cause serious problems once you file.

At the Craig Black Law Firm, I help working-class folks facing foreclosure, wage garnishments, repossession, or crushing debt find relief. That includes making sure any moves you make don't come back to bite you later. If you're considering filing for Chapter 7, I can answer any questions you have. Contact me at 678-888-1778 or complete this confidential contact form.

Why Paying Back Personal Loans Is a Problem

Bankruptcy courts are set up to protect consumers, but they also want to be fair to creditors. In fact, bankruptcy law dictates that all creditors be treated equally. When you pay back a personal acquaintance or relative within a year of filing, the bankruptcy trustee may label that a preferential payment.

Why is that bad? Because the trustee could go after the person you paid to get the money back. That means your buddy or parent could face a legal order to repay those funds, creating a hassle for the very person who did you a favor. The trustee isn't being malicious. The goal is simply to ensure all creditors are treated fairly.

What If I Have Already Repaid Someone?

If you're wincing as you read this because the money was already transferred, don't panic. The best thing to do is to be upfront about the payment as you're filing. The trustee will then let you know what to do. The Craig Black Law Firm can take a look at the situation and reduce any risk of legal action that can delay your filing.

But if it isn't too late, hold off on transferring funds to anyone until after you've filed. Once your debt has been discharged, you'll have the wiggle room necessary to repay personal debts. The important thing is that you're upfront and honest with the courts and the trustee to avoid being viewed as concealing assets.

Ready for a Clean Slate?

Chapter 7 can wipe out most of your debts, allowing you to start over. But if you're even thinking about filing, put a pause on paying back debts, even if those debts are to friends and family members.

If you have any questions about what you can and can't do before filing, I can help. In fact, when you call me at 678-888-1778, you don't get shuffled around. Instead, you talk directly to me, a bankruptcy lawyer who knows the ins and outs of bankruptcy law and can advise you on protecting your fresh start. Contact me today by phone or through my confidential contact form to discuss the specifics of your situation.