Facing severe financial strain and insurmountable debt can push you to consider borrowing from those close to you. Although your friends and family may be willing to extend a helping hand, it’s essential to examine whether this route is indeed the best choice. Before accepting any financial aid from loved ones to steer clear of bankruptcy, take into account these crucial considerations.
If you are considering filing bankruptcy, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a consultation.
Postponing the Inevitable: Does Borrowing Help or Harm?
Accruing additional debt without a clear repayment strategy is rarely advisable. If you need $1,000 for an overdue mortgage payment and are certain about a raise next month, borrowing that sum could be justified. However, if you’re uncertain about when or if your financial situation will improve, taking on new debts may merely prolong your hardships and even push you closer to bankruptcy.
The Risk of Jeopardizing Others’ Financial Stability
The decision to borrow from those close to you shouldn’t be taken lightly. You certainly wouldn’t want their financial stability to be compromised due to their goodwill towards you.
Bankruptcy as a Viable Route to Debt Relief
If you’re unable to devise a realistic plan to climb out of your debt, filing for bankruptcy could offer a more practical solution than trying to meet monthly expenses far beyond your income. Nevertheless, it’s crucial to understand how bankruptcy will impact any existing debts owed to friends or family.
Pre-Bankruptcy Repayment Limitations
Should you opt for bankruptcy, it’s important to note that this decision will restrict your ability to repay loans to friends or family. Payments or transfers made to friends or family within a year before filing for bankruptcy may be considered a “preferential transfer” by the court. If such payments are identified, the court could mandate the return of these funds for distribution amongst other creditors during your bankruptcy proceedings. Such actions might even result in accusations of bankruptcy fraud.
Chapter 13 Versus Chapter 7: The Impact on Loans from Loved Ones
In a Chapter 13 bankruptcy case, recorded loans from friends or family might be included in your repayment plan, allowing them to recoup a portion of their loaned amount. However, under Chapter 7, all unsecured debts, including personal loans, will be discharged, leaving your friends and family empty-handed.
Seeking Expert Advice?
If you’re contemplating personal bankruptcy and need guidance or assistance with your paperwork, don’t hesitate to reach out to Law Offices of Terrence Fantauzzi at (909) 552-1238. Our experienced team is ready to provide the support you need.