Bankruptcy carries with it a number of restrictions that you’ll want to be aware of. One such restriction is borrowing or receiving cash gifts from friends and family. Read on to learn more about money from friends and family during bankruptcy.
Money from Friends and Family During Bankruptcy
When friends or family members hear about your bankruptcy, one of the first things they might want to do is help you out by loaning you money. It’s hard to make the judgement on if you should accept a financial gift from a friend, or allow a family member to purchase a plane ticket for you to travel. That’s why you’ll want to consult with your bankruptcy attorney before you accept any money from friends or family. They will be able to advise you on how that money will or will not impact your bankruptcy and bankruptcy discharge.
Promissory Note v. Loan
The first thing you’ll need to do when receiving money from a friend or family is determine if there was a signed promissory note. A promissory note is a written and signed promise to pay a specific sum to a specific person at either a specified date, or when it is demanded by the loaner. This note must include all pertinent information about the borrower lender, the amount, the terms of repayment, and if there are consequences for not repaying the loan.
If there was a signed promissory note, then the money is considered a loan. Without a note, the money will be treated as a gift. All gifts are considered assets that will be considered in your bankruptcy filing.
This means that the person who gave you this money will be considered as a creditor in your bankruptcy, and will thus be entitled to repayment just as the other creditors are.
To protect your friends and family when it comes to loans during bankruptcy, it’s always advised that you speak with a bankruptcy attorney.
Working with a Bankruptcy Attorney
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix business bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
668 N. 44th St., Ste 320, Phoenix, AZ 85008