QUESTION
Will I be able to get paid back if I lend my friend money for his business and he files bankruptcy?
Asked on Sep 19th, 2012 on Bankruptcy - New York
More details to this question:
My friend is in over his head with his business. I work from him as a subcontractor. He had lousy credit so I said I'd help him out and loan him the money to keep the business going. I need to know if he can file bankruptcy on his debt and if so, will I be out of luck for payback?
15 ANSWERS
Criminal Law Attorney serving Fremont, CA
at
Steven J. Alpers, A Professional Corporation
Update Your Profile
Unless you have some sort of security you will not be able to collect on his debt.
Answered on Sep 27th, 2012 at 6:07 PM
You would be out of luck if the debt is unsecured. That is the purpose of the bankruptcy. Another option is perfect a security interest in some property of the business. Secured debts are handled differently in bankruptcy and as a worst case scenario you would be able to sell the security to collect something. Given that it is a friend, after his bankruptcy you would be able to "sell" him the security in exchange for the amount of your debt. Two caveats on that though - You must have a fully perfected security interest on property of value and you cannot agree to any sell backs of the security until after the bankruptcy, otherwise your executory contract would become part of the bankruptcy estate.
Answered on Sep 25th, 2012 at 5:02 PM
Daniel James Wilson
If your friend files bankruptcy, his debt to you will probably be discharged.
Answered on Sep 25th, 2012 at 5:02 PM
If your friend receives a discharge of his debts through bankruptcy, he can repay his debt to you, but he is under no obligation to do so, and you can't make him.
Answered on Sep 22nd, 2012 at 10:19 PM
He can pay you back if he wants, but he would be under no legal obligation to do so as this is exactly the kind of debt bankruptcy is designed to discharge in giving the debtor a "fresh start."
Answered on Sep 22nd, 2012 at 10:18 PM
Bankruptcy Attorney serving Overland Park, KS
at
The Smalley Law Firm, LLC
Update Your Profile
It depends what Chapter of bankruptcy he files and whether your loan is secured by property of his.
Answered on Sep 22nd, 2012 at 10:12 PM
Unless you take steps to secure your debt... you will likely not get paid anything if your friend files for bankruptcy.
Answered on Sep 21st, 2012 at 5:31 PM
Criminal Defense Attorney serving Deltona, FL
at
R. Jason de Groot, P.A.
Update Your Profile
You will be out of luck for a payback if he files bankruptcy, but you can count it for a loss this year. Do not lend money to failing businesses.
Answered on Sep 21st, 2012 at 5:30 PM
That's the entire point of filing for bankruptcy protection...the ability to not pay back debt that you cannot afford.
Answered on Sep 21st, 2012 at 5:26 PM
Barbara A. Fontaine
He will list you as a creditor, so you probably will not be paid. However, in the future he could pay you something even if he did not have the debt then.
Answered on Sep 19th, 2012 at 1:52 PM
If he files bankruptcy he will include the money he owes you. At that point he will no longer be legally obligated to pay you back and you cannot collect from him. He can choose to pay you back if he wants. But you can not pursue collection.
Answered on Sep 19th, 2012 at 1:51 PM
Bankruptcy Law Attorney serving Livingston, NJ
Partner at
Law Office of Stuart M. Nachbar, P.C.
2 Awards
Yes unless you can prove fraud and have it exempted from discharge. If he personally files a C13, you may get pennies on the dollar If a C7, you would probably get nothing and if a C11, depends on how it is filed.
Answered on Sep 19th, 2012 at 1:31 PM
Bankruptcy Attorney serving Phoenix, AZ
at
Law Office of D. L. Drain, P.A.
Update Your Profile
You are probably going to be "out of luck". You can hedge your loan by securing it against collateral that has equity - such as house, land or vehicles. Otherwise, you are an unsecured creditor and will be treated like everyone else. I hope this helps.
Answered on Sep 19th, 2012 at 1:28 PM
Bankruptcy Attorney serving Walnut Creek, CA
at
Alan E. Ramos Law Offices
Update Your Profile
It depends. If you lend money to him and the loan is secured by real or personal property that he owns, and there are no other secured creditors, you could be repaid. If the loan is entirely unsecured and all of his assets are either pledged as collateral for other loans or not worth much, you will probably not recover anything. Hopefully, as a sub-contractor, you have filed the preliminary notices required to be filed for the jobs on which you are working so that you have preserved your mechanics lien rights.
Answered on Sep 19th, 2012 at 12:56 PM
Bankruptcy & Debt Attorney serving Syracuse, NY
at
Theodore Lyons Araujo
Update Your Profile
It depends on the nature of the security, the value of the assets of the business and the type of bankruptcy. You have to see a lawyer to advise you. If your debt is unsecured you are among the pool of other unsecured creditors. If it is a 13 or an asset Chapter 7 you have to file a Proof of Claim to preserve the claim.
Answered on Sep 19th, 2012 at 12:55 PM