Bankruptcy and Money Lent to Friend

BrokeandDesperate021

Good Morning, I wonder if anyone can offer me any insight?

I am in the process of preparing all the information I need to declare myself bankrupt with debts of circa 35k and no realistic way of servicing them and I am concerned because in mid-October 2025 I lent £650 to a friend via a bank transfer. I know I shouldn't have done this, but he had lost his job, had no recourse to public funds at the time, was unable to pay his rent and was at risk of homelessness because he was a lodger and the landlady was asking him to leave.

He has finally got back on his feet, but so far has been unable to pay the money back to me.

My understanding is that the Official Receiver will attempt to recover the debt from him once I am bankrupt, but at the moment he is unable to pay it as his wages are only just servicing his bills, work-related travel costs, living expenses, etc. I have read online that the Official Receiver can take him to court or use debt collection agencies to pursue him for the debt, so I am trying to understand what is likely to actually happen and how bad this could be for him.

Thank you for any insight that anybody can offer.

Woodstok2000

When you say 'lent' was that formal, with a signed agreement, or an informal loan between friends?

BrokeandDesperate021

Hi, it was informal. He phoned me in a panic and I transferred the money to him the same day.

Woodstok2000

So you've got a decision to make if you haven't already recorded it as a loan. You could class it as a gift, in which case the receiver cant do anything but it also means in future youll have no legal redress to get the money back (which you won't have anyway if you become bankrupt).

Or you can record it as a loan. It's informal, so the receiver would have limited options and are unlikely to take it to court, but you never know.

BrokeandDesperate021

Hi Woodstok2000, thank you for your advice. I have accepted that I have no redress to get the money back at this point whatever happens next.

Am I correct in thinking that if I class it as a gift then the receiver is still likely to try to get it back? This is what Google is suggesting as it will be a 'transaction under value' and was made within the last 2 years. Also, I presume I can expect a BRO for having made the gift? I am happy to live with the BRO, I am just trying to fully understand what the implications might be for my (probably soon to be ex-) friend who is going to get dragged into this through no fault of his own.

Altior

Seems to me that your money crisis is worse than his was. It seems inconceivable that you're on the brink of bankruptcy, and yet they can't find any money to begin paying you back, after you recently rescued them with funds you didn't have. Even at a modest rate. Is it a case of can't, or won't?

mr_stripey

I'd second what @Altior says. I think your own problems are the priority and I wouldn't be worrying too much about the impact on your friend. If the receiver goes after him then he will just have to deal with the conequences of not paying you back the money you loaned him

BrokeandDesperate021

https://forums.moneysavingexpert.com/discussion/comment/81938227#Comment_81938227

Right now it is a case of 'can't' as he has found just enough work to survive. One thing I can absolutely confirm is that it has never been a 'won't.' He hates the fact that he had to borrow money from me and that he has not been able to pay it back yet and was actually most upset at the idea that I am declaring myself bankrupt and therefore potentially removing the option to pay it back in the future. If he had the money he would absolutely pay it to the Receiver and I would have no issue with him doing-so.

BrokeandDesperate021

And yes, I know I should never have lent it to him in the first place. I have very little support network since ending an abusive relationship a few years ago and very few friends. I will admit that my fear of losing the few friends I have may have pushed me towards making the loan and that this was a very stupid thing to do.

I will happily accept the full force of any restrictions I receive for however long the Receiver deems necessary. There are no restrictions that could possibly make my life or mental health any worse than they are at the moment, so they can throw anything at me they deem necessary at this point, leave me with the smallest budget I can survive on and take every other penny I have as a IPA arrangement and I will accept it graciously as punishment for everything that has got me to this position.

Altior

https://forums.moneysavingexpert.com/discussion/comment/81938255#Comment_81938255

I wouldn't be disappointed with myself for lending the money to a friend in genuine need. I would be disappointed with my friend for not even beginning to repay it, given the circumstances. It's not your fault as they say. We are all built differently, but if it meant beans on toast for a few weeks to even start paying you back, that's what I would be doing. Whatever it took.

Woodstok2000

You did a good thing, don't beat yourself up.

It seems like you want to put the burden on yourself and shield your friend as far as possible. If thats the case then put it down as a gift. The receiver may approach your friend, but if they are really as hard up as you say then its not going to go very far.