Why Borrowing from Your Family Is a Bad Idea?

When you need money, your family and friends may seem like the best people to turn to for help. These people care about you and may be more willing to help you out than a bank. However, if you ever file for bankruptcy protection, borrowing from your loved ones could hurt the well-being of your family as well as your bankruptcy filing.


When you file for bankruptcy protection, the court wants to ensure all of your creditors receive equal treatment and that none are paid back earlier due to a personal relationship. Parents, grandparents, siblings, and other people with whom you have a close relationship are going to face higher scrutiny because they are seen as having preference. Preference means you would elect to pay these people back before other creditors.

Repaying People with Preference

Suppose you borrow from a friend and decide to pay him back a month before filing for bankruptcy. This is a preference payment. The court will be extremely wary of preference payments and can actually decide to take back that money from your friend. The court can actually recover payments to a family member for a full year after you make them. The estate trustee can sue your family to get the money back, exposing your relatives to a lawsuit.

Property Transfers

Another way to expose your family to hardship is by transferring ownership of property to them before your bankruptcy filing. For example, if you worry your car will be sold to pay off creditors then you may consider transferring it to a relative before filing in an attempt to keep it. It is best to avoid transferring property before your bankruptcy filing. Otherwise, the asset can be taken away from the family member to whom you transferred it. The court wants to prevent you from hiding assets from creditors, which is why they will thoroughly examine every transfer of ownership you made before your bankruptcy filing, including gifts.

Contact a Raleigh Bankruptcy Lawyer

Filing for bankruptcy protection is a complicated and time-consuming process, but you don’t have to go through it alone. If you are suffering from an overwhelming financial burden, you should contact the Bradford Law Offices, PLLC immediately. Our experienced consumer bankruptcy attorneys will work with you to determine the right course of action. Please don’t hesitate to contact our Raleigh offices at (919) 758-8879.