If my parents filed bankruptcy and I loaned them money for which they’ve been paying me back, do they risk fraud by doing this and can I also be charged?

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If my parents filed bankruptcy and I loaned them money for which they’ve been paying me back, do they risk fraud by doing this and can I also be charged?

My parents are filing bankruptcy. I’ve found out that I am listed as a creditor because I loaned them money. They have been paying me back in installments via cash. I’ve learned that by doing so they risk a charge of bankruptcy fraud. Could I also be charged with bankruptcy fraud in this situation?

Asked on April 13, 2012 under Bankruptcy Law, California

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

You can be because no amount of money should be exchanging hands such that you are considered a preferred creditor over another. If the debt is discharged, you essentially have your money back but the other creditors whose debts are discharged do not have the same benefit. 


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