You have probably heard that it is never a good idea to loan money to relatives or friends. While this is true in order to preserve your relationships, it is also true to protect your finances. When a friend or family member is struggling financially, you must choose between two options. The first is to understand that the “loan” is actually a gift and do not expect to ever get repaid. The second option is to properly document the loan and the borrower’s legal obligation to repay you.
For example, if you loan money to your best friend to help him to buy a car, it is important to do the paperwork the same as a financial institution would. This means that your buddy should sign a promissory note and security agreement pledging the car as collateral securing your loan. You should also file any necessary lien documentation or notation on the certificate of title, as required by your individual state. This will also safeguard your interests if your friend should file a Chapter 7 or Chapter 13 bankruptcy.
If you are concerned that taking steps to protect yourself will make your friend mad, you should understand that that having the loan properly documented could help your friend keep the vehicle in his/her bankruptcy case. When a trustee reviews the debtor’s assets and determines that a security interest has been properly recorded against the car, the trustee will not sell it for the benefit of the creditors.
If you have questions regarding how loans are treated in a personal bankruptcy case, call the lawyers at DeLadurantey Law Office for help.
If you would like a down-to-earth approach and a lawyer who will listen carefully to all your questions and concern, call DeLadurantey Law Office, LLC,at (414) 377-0518. We serve clients primarily in the areas of Chapter 7 and Chapter 13 bankruptcies, debt negotiations and defending foreclosure actions. If you live in the area of Milwaukee, Wisconsin, call us for the debt relief assistance you need. Visit our web site and like us on Facebook.