Any bankruptcy lawyers out there? This is a general question about bankruptcy. I am not asking for legal advice and you are not my attorney. Sorry for the long post.
A few years after she turned 18 my daughter borrowed a large sum of money from my dad, her grandfather. She signed a note to repay the money and was charged simple interest. It was a good deal for her since no bank would lend her money, and it was good deal for my dad who was looking to earn some decent interest on his savings. Everyone seemed happy with the arrangement at the time.
The monthly payment was steep, $400 a month, but my daughter had a good paying job at the time and she began paying him back regularly. A few years along she fell on hard times and asked if the loan payment could be reduced so that she was only paying $200 a month. That went on for a while until she racked up $18,000 in credit card debt and decided to declare personal bankruptcy.
As I understand from talking to her after the fact she went to court and presented all of her debt, including my father’s loan, and it was all excused by a judge. I wasn’t aware that my father’s loan was part of the bankruptcy. While I was aware she was declaring bankruptcy it wasn’t well known in the family, so my father had no idea.
A few months passed and my father asked me to find out when she was going to start paying back her loan. She had stopped paying around the time of the bankruptcy. When I confronted her about it she said that the debt had been excused and she didn’t owe him the money anymore. I explained that he was never given notice of that fact, and still hasn’t to this day.
It is my understanding that the debt holder has to be notified in writing that the debt has been excused. It’s not done in secret. Is that true or can the debt holder be kept in the dark about a bankruptcy that involves their debt?
Please no lectures on why you should never lend money to family. I thought it was a bad idea from the get go.
Not my area, but I believe the court should have sent notice to all the creditors that bankruptcy proceedings have *commenced *even if there was no obligation to report on the result.
Have you seen paperwork from her regarding the bankruptcy? I’m sure you trust her and all that, but did she list him as a creditor? Because it seems the court would notify creditors.
From the US Bankruptcy Court for the District of Montana website:
"The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. "
Even if she has been legally freed from the obligation to repay her grandfather, I hope that someday she finds herself in a position (and a frame of mind) that allows her to do so.
My guess is since he was never notified, she never specifically included that private debt in her filings. I realize you say she did. In either event, whether she is or isn’t required to pay it back is a legal question that would need to be addressed by a lawyer.
But there is no question that she has a moral obligation to pay back her grandfather who stepped in to help her when traditional lenders wouldn’t.
Pursuant to the bankruptcy code, she was required to list every debt that she owes, of any kind. Since he never got notice – which should’ve been notice of the initial filing and 341 meeting of creditors, and the discharge- I would bet she did not put him on there.
The proper remedy at this point would be for her to reopen the bankruptcy and add him as a creditor so he gets proper notice. Practically speaking, if hers was a no asset case, there is no point in paying to reopen the case and have notice issued, because he did not miss out on any opportunity to file a claim against any assets.
And I agree that she should pay him back. Now, she has no debt to pay so there should be plenty of disposable income. There is absolutely no bar to paying back any of your creditors after the bankruptcy has been discharged.
ETA: I am assuming she filed a Chapter 7 bankruptcy. If she has filed a Chapter 13, then she does need to talk to a lawyer soon as possible.
IAAL. IANABL. Unless he was listed as a creditor, the debt owed to him was not discharged in bankruptcy and is still owed - at least pursuant to the bankruptcy code. There may be various state-law reasons why the debt would not be owed which are unrelated to the bankruptcy.
Out of curiosity, did she offer any security for the loan? From the amount, I’m guessing she used it to buy a car.
Ask to see her paperwork, that this debt WAS listed and therefore excused. If she won’t show you there may be one on file at the courthouse. Check and see.
My guess is she didn’t list him, and is just using this as an excuse to evade repayment.
Does anyone know, if it’s not listed, does she still owe the money?
For some reason people like to think of their discharged debts as being wiped away/excused/forgiven.
I once had someone show up at my business about six months after a bankruptcy that had allowed her to walk away from $500 she owed me. I was flabbergasted. I reminded her about the $500 and told her I did not want to do business with her. She acted shocked, and told me I wasn’t allowed to even mention the prior debt.
This says generally, fail to list does not matter:
…except in first circuit?
“The First Circuit includes the Districts of Maine, Massachusetts, New Hampshire, Puerto Rico and Rhode Island.”
As the link mentions in a no-asset Ch7 it doesn’t matter - the logic is that even if the debt had been listed, the creditor still would have gotten nothing.
OTOH, when it comes time for grandpa to re-write his will, hopefully he deducts her debt from what he allocates to each grandchild - plus an additional penalty for her being sufficiently uncaring as to not make an effort to right things even within the family, law notwithstanding.
If I were a really grumpy grandpa, or not too well off - I’d suggest reducing your share of his inheritance by the amount in question, with the suggest you get it off your daughter instead. Pass the moral obligation on to you… “she shafted grandpa, will she do the same to her parent?”
(My general view is that if the banks won’t lend money, there’s probably a good reason. After all, they can afford to lose a few thousand a lot easier than grandpa can…)
I met with a low-cost “Bankruptcy” lawyer who handled the paperwork for approx $1000.
I mentioned to her the State Lien, various Credit Cards, a truck rental place (I would pay them when Hell froze over - I paid $250 for their “Covers Everything” insurance. Except for that event so rare the claim form dedicates 4" of space to cover it).
The State did not know of the case, the credit card folks kept calling. I took to keeping a copy of the Discharge form by the phone.
Frankly, I was surprised to find none of them had notice. I had always believed it was required.
According to the lawyer “the Court takes care of that”. Which would be false - the lawyer most likely put in a 6 line ad in one of the legal papers.
If you don’t know: all of the required legal notices support a network of dedicated papers which do noting but those little ads you used to see in your “Family Paper” back in small town USA.
Does the paperwork really matter. She took a loan from her Grandfather, she needs to repay it. Since her other debt was discharged she should have plenty of money to do so now. Time to teach your daughter the right thing to do. As a bonus, I’m sure that her ability to borrow money from the family is now nil.
I’m not sure what the point of bankruptcy would be if the paperwork didn’t matter. The whole purpose is to nullify the legal requirement to repay debts; so yes, the paperwork really matters.
No more than she needs to pay the bank, or the car loan, or the credit card companies. There are different consequences to not repaying her grandfather, but loans are risky no matter who is paying. I’m not sure why she has a moral obligation to pay back her GF rather than the banks.
She doesn’t do holidays with the bank.
Banks make loan decisions based upon objective criteria; their thoughts on your ability to repay & not because they love the lendee.
This is where we’ll have to disagree. Family shouldn’t be treated the same as other creditors. Chances are grandpa is on a fixed income. But the real issue is that family are the people who you can turn to for help. If the family knows you’re going to turn your back on repayment they’ll think twice about helping in the future.
You would think that the one person whom she would have a strong moral obligation to repay her family, since she no longer has other debts. It would be a different story had grandpa told her not to worry about it.
There was a shady financier in Toronto in the 60’s who was involved in some interesting deals. After he was hospitalized when someone placed a bomb under his bed, he was charged with assorted crimes and arrested. His elderly parents put up their house as bail. He skipped town and was caught a few years later in Spain. Ontario started proceedings to foreclose on the parents’ house, forfeit from skipped bail. The parents were quoted in the Toronto Star as saying the province was acting like Nazi Germany. The Star also published an editorial suggesting the parents should have been more discriminating in who they put up their house for.
The same applies here. If grandpa did not know her financial proclivities that’s his problem.Granddaughter does not legally have to repay him; but if she thinks that morally she does not owe something to a family member who went out on a limb when nobody else would, who may need the repayment - then she is saying something about her character. But then, she racked up $18000 in credit card debt. How does someone do that unless they are completely irresponsible?