In today’s society it’s been pretty common to see friends and family members loaning money to other friends and family members. I remember when I was a kid and my parents used to always say don’t loan any money to a friend if you want to keep them as a friend. Since the real estate meltdown back in 2008, people are using all of their resources just to survive. Sometimes that includes borrowing money from friends and family members. Where this could all go south is not having the ability to pay it back and end up filing for bankruptcy. That’s why is a terrible idea. Ideally, a new job would show up or you win the lotto and be able to pay everyone off before filing bankruptcy. Although this sounds good, this is not the real world. The economy is not getting any better and people are lucky that bankruptcy is available to wipe out the debts.
Many debtors don’t realize that when you file for bankruptcy you are required to list all your creditors. The debtor doesn’t have the luxury of picking which ones to choose. If you borrowed money from a friend or family member, you will be required to list them and they will be notified of the pending bankruptcy. So much for keeping it a secret. If you know you’re facing bankruptcy, it would be a good idea to go and have a cup coffee with friends and family members you owe money to prior to the bankruptcy filing. Giving them a heads up you might be able to salvage the relationship. Just because you file for bankruptcy, doesn’t mean you can’t pay them back. If this relationship is important to you it would be good to work out some kind of reasonable payment plan to make sure they get paid back after the bankruptcy filing. Although it’s too late now, for future knowledge, it’s best not to borrow money from people that are close to you because it usually ends bad.