contesting bankruptcy for money loaned to a family member for mortgage payment

You make a good case that "no good deed ever goes unpunished." I am sorry you are facing this problem.

The preferential transfer law in bankruptcy that probably applies to you is a rule allowing the trustee to recover money that your family member paid back to you within 12 months prior to the bankruptcy filing. If you are not a "true" relative, the time frame might be only 3 months.

It is legal for the trustee to seek this, and whethor or you should fight this depends on a number of things that you haven't covered. How is the person related to you? How much were you paid? When did you loan the money? When were you paid, and when was the bankruptcy filed?

Fortunately, most bankruptcy lawyers won't charge you anything for an innitial consultation. I would like you to go see a local bankruptcy attorney right away for an evaluation.

Even if the trustee has a solid case against you , it is often possible to negotiate a settlement and resolve this with a reasonable discount.