Family loan & bankruptcy

ChrisPR

My wife and I lent a family member a few thousand pounds as their new business was struggling and they needed a quick bail out. Looks like they may now be about to declare bankruptcy some months later.

Is our money lost, or will we be able to recover it through the process of bankruptcy ? The family member WANTS to get the money back to us, but just can't afford any repayments.

Oliver2809006

If they go bankrupt the only way your receive anything if they have to do an IPA, then you'll get next to nothing back anyway after the state and other creditors take their cut.

Your best bet is to not mention the loan when they go bankrupt and sort it out internally between yourselves in the long term.

As it's a loan to a family member can it be be included in the bankruptcy anyhow....???

sourcrates

ChrisPR wrote: »

My wife and I lent a family member a few thousand pounds as their new business was struggling and they needed a quick bail out.
Is our money lost, or will we be able to recover it through the process of bankruptcy ?

Your family member will be insolvent, so there wont be any money left.
If the company has any assets, they will be sold to realise capital which will be shared amongst the creditors, one of which you will become.

If, they get an IPA, you may get a small % back via that route, but otherwise the money has gone i`m afraid.

If, at a later date, they want, and are able to settle with you privatly, then that is up to them, but bankrupcy is an all encompassing solution which wipes out all liabilities owing at the time, with the exception of certain fines etc, so legally they are not obligated to do so.

TheGardener

All provable debts are included in bankruptcy - so yes, a family loan can indeed be included.

I was in a similar position in that I owed a close family member money from a loan when I went BR. The law is clear that I couldn't make payments to my family creditor as that would be 'preferential payments' so - after I was discharged, I became their gardener! They had employed a gardener for some years and I took on this role at the same 'rate of pay'(I was qualified and experienced enough to do that) for as long as it took to pay them back 'in kind'. It meant that I made sure someone I cared about very much was not left out of pocket and our family relationship did not suffer any long term damage. The plus was I got to spend more time with them too
So I guess the question is - what's more important, the family relationship or the money? The answer to that question will determine what course of action you follow.

JCS1

Oliver2809006 wrote: »

If they go bankrupt the only way your receive anything if they have to do an IPA, then you'll get next to nothing back anyway after the state and other creditors take their cut.

Your best bet is to not mention the loan when they go bankrupt and sort it out internally between yourselves in the long term.

As it's a loan to a family member can it be be included in the bankruptcy anyhow....???

What do you mean by the bit I have put in bold? HMRC have not been a preferential creditor since the Enterprise Act of 2002.

Oliver2809006

Insolvency department / Official Receiver - should've been clearer.

A IPA like an IVA, the actual creditors get next to nothing on any payments made swallowed up by the trustees / insolvency department blah blah.

ChrisPR

Thanks all for your help / advice / knowledge. We want to maintain the family relationship, of course, so that's the priority for us. Maybe the loan will get repaid when their fortunes change. Cheers again.