We have experienced financial devastation in the last year, and after consulting a debt counselor and a bankruptcy attorney, it has become clear that our only option is bankruptcy.

We are now in the process with the attorney of determining which chapter is the best option for us. In the meantime. I need to know whether to include loans made to us by private individuals. Will they be out of their money completely? Are there any compensations or tax benefits for them if this happens?

Several people loaned us money with a payback agreement (amortization schedule and everything), and we just can't currently make those payments. But unlike commercial creditors, these are people we have personal relationships with that we don't want to hurt or put in financial jeopardy. If including them in the bankruptcy filing will leave them with nothing, then we would rather keep them out of this and try to figure out with them how to pay them back after the bankruptcy is complete.

Do you have any thoughts or advice on this for us? We are good people that never wanted to welch on any of our financial commitments... we just found ourselves in a combination of bad circumstances in the last 18 months that set us in a downward financial spiral that we can't pull out of alone anymore. It's bad enough we have to break our promises with credit card companies and commercial lenders. But we can't face the idea of hurting the people that believed in us enough to loan us their personal funds.

Thank you for your time and consideration of this topic.

Just two observations: 1) a debtor must make an affirmation that all debts have been disclosed, as well as all expenses included in the budget; and 2) there is a process for paying creditors whose debts are discharged, called reaffirmation. You should speak with your attorney about your concerns.

Just two observations: 1) a debtor must make an affirmation that all debts have been disclosed, as well as all expenses included in the budget; and 2) there is a process for paying creditors whose debts are discharged, called reaffirmation. You should speak with your attorney about your concerns.


Thanks for the commentary. I'm very new to this, and even in the straits we find ourselves in, we want to do the right thing.

I believe the 'right thing', then, is to tell the truth; you wouldn't want a creditor to show up at your meeting of creditors and start asking you about a debt that was not included on the petition. That could be not only embarrassing, but painful. It could lead to dismissal of the case. Talk to your attorney about your concerns, please.