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Chapter 13 bankruptcy, family member is creditor listed on chapter 13 petition can I sue to recover money

Asked over 3 years ago - Saint Charles, IL

i barrowed a family member some money they agreeed to pay me back fromthe sale of their second home or 6 months whichever came first, 2 years later the home was sold and they have not paid me back, in the midst of selling their home they filed chpter13, i did have them sign a contract agreeing to pay me back fromt he sale of their home can i sue them.

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Attorney answers (5)

Kent Anderson

Reputation Level 9

Answered over 3 years ago. Bankruptcy Attorney in Eugene, OR.

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No you can not sue them. The automatic stay of the bankruptcy court under section 362 prohibits any action to collect a pre-petition debt. You can file a claim in the bankruptcy case and ask to be paid if you do so before the time for filing claims expires. If no plan has yet been confirmed, you may be able to object to confirmation of the plan. However, you risk being sued for violation of the bankruptcy stay if you try to take action outside of the bankruptcy proceeding.

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Mazyar Malek Hedayat

Reputation Level 12

Answered over 3 years ago. Bankruptcy Attorney in Lockport, IL.

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Bankruptcy is designed to thwart creditors - so you cannot avoid a bankruptcy discharge just because the debtor did not pay you back. After all, that's the point of bankruptcy. However, there are ways to sue and a lawsuit CAN succeed under the "right circumstances." The right circumstances will depend on just what the debtor did and whether those actions violated the Bankruptcy Code. Long story short, fraud in some form or other is nearly always a winner in these circumstances. But be careful: failure to pay is not fraud. Fraud must arise from a limited number of bases and be very specifically shown to surmount a bankruptcy. If not you will be wasting your time and money. To get a specific idea of whether these circumstances rise to the necessary level, consult a knowledgeable attorney in your area.

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Lesley Abigail Hoenig

Reputation Level 14

Answered over 3 years ago. Bankruptcy Attorney in Mount Pleasant, MI.

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Unless there is fraud or conversion involved, you cannot sue them and if either of those issues were involved you would have to sue them through the bankruptcy court in an adversary proceeding. If it is a chapter 13 case, the first thing you want to do is file a proof of claim with the court before the deadline. This will ensure that you receive something for your loan to your family member. How much you receive depends on what percentage of their debts they are paying. It may help to consult an attorney about drafting the claim and reviewing the plan to determine how much you'll likely receive. Also you could consult with an attorney to see if you have a case for objecting to discharge.

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David Leibowitz

Reputation Level 11

Answered over 3 years ago. Bankruptcy Attorney in Chicago, IL.

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In general, the answer is no. However, did you have a mortgage on their home to secure payment of your debt? If so, you could be paid from the proceeds of sale. Otherwise, you are not protected.

Some debts can't be eliminated in bankruptcy. But you'd have to file a separate lawsuit and you'd have to file it within strict time limits. And even then, you'd have to prove that the debt was procured by fraud or otherwise not dischargeable in bankruptcy.

So it doesn't matter that the debtors are family - you probably can't sue them. Do ask a local bankruptcy attorney about the specific facts of your case as soon as possible

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Kevin Lee Linder

Reputation Level 14

Answered over 3 years ago. Chapter 13 Bankruptcy Attorney in Springfield, IL.

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There are several things that we need to know -- did you record the note as a mortgage on the property? If you did, the debt might not be dischargeable. When did they file? The bankruptcy code provides deadlines to file claims and if you are within that time frame you can file what is called a "proof of claim" and then it depends on how your claim is classified. In general, secured debtors are paid back. If you are an unsecured debtor then you may be paid some or all of your clima. You need to read the Chapter 13 plan to see what provisions are made for repayment of debts.

The best advice is to contact a bankruptcy attorney in your area and go to the meeting of creditors (or commonly called the 341 meeting) and have the attorney prepared to represent you. Please understand that the US Bankruptcy Courts now require claims to be filed electronically via the internet. While it may seem easier (and less expensive) to hire someone to represent you, having competent legal advice is invaluable. If you miss a date then your claim will be barred and you will not collect anything. If the plan provides for no payment for the class of creditors of your claim and you fail to object then you may receive nothing.

Please contact a local bankruptcy attorney.

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