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I borrowed money from my relatives

Question: My business is not making a profit and I keep putting money into it. I don't think I want to keep it open much longer. I'm seriously considering filing for bankruptcy. The business started losing money in the past year but for almost 5 years it actually made good money. I think our competitors are getting their products much more cheaply overseas.

To keep the business going I had to borrow money from my uncle, my cousin and my father-in-law. They each loaned me $50,000. Now I can't pay them back and my cousin has been threatening me with a lawsuit. I don't have the money to fight the lawsuit. Even my uncle has been calling me and harassing me. He calls me an idiot and a dunce.

So I really don't want to pay any of them back. And I want the harassment to end. It's stressful enough trying to turn a profit and I really don't need these relatives calling me names and making threats. Oh, and my father-in-law is actually the worst. He actually told me that I was his daughter's dumbest boyfriend and that when we first met he actually thought I was suffering from a mental issue.

I need them to get off my back. If I file bankruptcy, can I include the debts to my relatives? I never thought I'd be asking this, but I need to file or do something to stop them from contacting me.

V.I. in Roswell, GA

Answer: Yes, debts to relatives can be eliminated (discharged) with a bankruptcy filing. Either a chapter 7 or a chapter 13 can get rid of the debts. Since your relatives loaned you money, they will be treated just like any other creditor.

After you file, they will be treated by the bankruptcy court just like a credit card company, finance company, car company, doctor, hospital, landlord or any other person or business you owe money. Just because they are related to you does not give them any special status.

And they must abide by all of the applicable laws. So they cannot harass you or even demand that you pay the debt. They cannot sue you, try to garnish your wages or try to seize your bank account. If they do, the court can penalize them.

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