Over the past few months, our office has seen a number of bankruptcy clients who have had personal loans from family and friends in addition to more common types of debts like credit card bills, medical debt and bank loans.  In a few cases, our office did not find out about the debt owed to mom, dad or a sibling until long after the case was filed.

The bankruptcy law is extremely clear that all debts must be included when you file for bankruptcy.  This includes loans from mom or your brother.

Failure to list debts owed to friends or family can result in your case being dismissed.   Fellow blogger Reed Almand of Dallas speaks about this issue in his Dallas bankruptcy law blog post about the requirement to include debts to family in your Chapter 13.  Reed specifically discusses Chapter 13, which is a payment plan.   When your attorney calculates your Chapter 13 plan, he has to account for all of your creditors.  If $5,000 or $10,000 has to be added 30 or 40 days after your case is filed, your entire plan will need to be recaluculated, meaning that your attorney as well as the trustee will have to start all over and perform a lot more work.  As Reed notes, some trustees will even argue "bad faith" and try to get your case dismissed.

The bottom line - debts to mom, friends or other family are debts that need to be included in bankruptcy.