Legal Question in Bankruptcy in California

Re: Family Member Owes Us Money

If your father-in-law doesn't have money to pay to keep his house out of foreclosure, then he won't have money to pay a judgment that you might get. In addition, the judgment would be wiped out in bankruptcy, unless the debt was incurred under fraudulent circumstances. Therefore, it doesn't seem prudent for you to pay a lawyer to sue when the end result will be that you won't see a dime, anyway.

Re: Family Member Owes Us Money

To add a twist to what Mr. Cohen posted, lets say your father-in-law somehow managed to come up with the $50,000 and pay you back before filing bankruptcy. As relatives of the father-in-law, you are considered "insiders" which means that the bankruptcy trustee can go back, and unwind the repayment of that loan, and force you to pay the money back into the bankruptcy court to be shared equally among the creditors. You will probably get none of that money back because the trustee will also seek to have your claims against the debtor (father-in-law) disallowed in the bankrutpcy. I am defending a case almost exactly like this right now, and the innocent party who loaned the debtor $100,000 and simply had that loan repayed - even without any hint that the person would file bankruptcy later - is now being forced to defend a lawsuit from the Trustee. Its costing them close to $25,000 to take it to trial. You are probably better off waiting to see if he does file bankruptcy, put a claim in for the money, and if he doesn't file, then take formal legal action.

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