How can I protect my promissory note from being discharged in bankruptcy court? 18 Answers as of July 10, 2013

I loaned roughly $15k to friends for a start-up business and they gave me a promissory note. They made payments per the agreed schedule for six months, but then they both lost their jobs and stopped paying. I discovered their house is now in foreclosure and the wife filed for bankruptcy. Any way I can get a non-discharge note?

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Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
You can file a proof of claim in her BK as long as it's timely.
Answer Applies to: Washington
Replied: 6/30/2011
Law Office of Asaph Abrams
Law Office of Asaph Abrams | Asaph Abrams
Not from those facts. I don't mean to sound trite, and I'm sorry for your loss, but business is about risk-taking-one shouldn't invest if one is not able to sacrifice the investment.
Answer Applies to: California
Replied: 6/28/2011
Evan M. Altman Attorney at Law
Evan M. Altman Attorney at Law | Evan M. Altman
Too late at this point.
Answer Applies to: Georgia
Replied: 6/27/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
Not likely. You would have to prove they committed fraud to get the loan from you.
Answer Applies to: California
Replied: 7/10/2013
Rosenberg & Press
Rosenberg & Press | Max L. Rosenberg
The good news is that if both spouses signed the promissory note and only the wife filed bankruptcy, then the husband is still on the hook for the debt. Also, in my experience, spouses file together to save the extra cost of a second filing or one spouse refrains from filing so that at least one person in the marriage maintains their credit. Otherwise, if your promissory note is unsecured, meaning not attached to any real property or collateral, you will likely be discharged as to the filing party. However you can offer the creditor a reaffirmation agreement during the course of the bankruptcy, and provided she agrees and signs within thirty days of the 341 hearing, you may be re-affirmed as a creditor. If that is not an option, then depending on the filing date, if the execution of the promissory note was within six months then it is possible that it is not dischargeable. Also, if the debtor has assets, you may make a claim to those assets that are not exempt under the law. It can also be advantageous if you are not listed on the petition and may bolster your claim to non-discharge ability. There is another possibility for a creditor, and that is to file an adversary proceeding. This can be filed if there is fraud on the debtor's part inducing the creditor to give the loan. This culminates in a trial like hearing which determines the dischargeability of the debt. Please contact us if you are in NY or CT and need more info. Thanks for tuning in.
Answer Applies to: Connecticut
Replied: 6/27/2011
    Burnham & Associates
    Burnham & Associates | Stephanie K. Burnham
    Your friends could choose to reaffirm your debt, however, there is not going to be any way to force them to do so unless they committed fraud to induce you to loan them money. In the circumstances you describe your debt is going to be discharged against the wife in her Bankruptcy.
    Answer Applies to: New Hampshire
    Replied: 6/27/2011
    Breckenridge and Walton
    Breckenridge and Walton | Alan D. Walton
    Absent fraud (which requires you to sue in the wife's bankruptcy), in a chapter 7 you lose the right to go after her for the money. If the husband did not file, you can still seek payment from him. In a chapter 13, you need to file a claim in her case, and as long as she is abiding by the plan, you have to leave the husband alone.
    Answer Applies to: Michigan
    Replied: 6/27/2011
    Law Office of Maureen O' Malley
    Law Office of Maureen O' Malley | Maureen O'Malley
    Sorry, unless you filed the note under UCC, then it's unsecured and will be discharged. If it's an asset case you'll be asked to file a proof of claim, which will pay you some small percentage of what you're owed. You may not take any action against them or talk to friends about them costing you money, as this will be seen as a violation of the stay and you could be sued.
    Answer Applies to: Virginia
    Replied: 6/27/2011
    Badgley Law Group
    Badgley Law Group | Jeffrey Badgley
    The promissory note is a dischargeable debt in a bankruptcy proceeding. If the wife signed the promissory note, then her obligation will be discharged if she has filed a chapter 7 bankruptcy and she completes all the requirements for a discharge. But if the husband also signed it and he did not file bankruptcy, then the wife's discharge does not eliminate his obligation.
    Answer Applies to: Florida
    Replied: 6/27/2011
    The Law Office of Mark J. Markus
    The Law Office of Mark J. Markus | Mark Markus
    Nope. There's no such thing, and if they already filed bankruptcy it's too late to get a security interest in collateral they own.
    Answer Applies to: California
    Replied: 6/27/2011
    Sariol Legal Center
    Sariol Legal Center | Frank R. Sariol
    I assume that the friends that signed the note are husband and wife and that the wife filed for BK. If that is the case and if only the wife is filing BK, then the husband is still liable for the note. If the husband files BK as well, then you are out of luck, UNLESS, you convince your friends to "re-affirm" the note.
    Answer Applies to: California
    Replied: 6/27/2011
    Colorado Legal Solutions
    Colorado Legal Solutions | Stephen Harkess
    Nothing in your story demonstrates a valid grounds for having the debt ruled non-dischargable. If you thought the loan was obtained by fraud and you could prove it in an adversary proceeding filed in the bankruptcy court then the debt would be non-dischargable. However, you indicate that your friends tried to pay the loan until they lost their jobs. That is the sort of debt that is dischargable in bankruptcy.
    Answer Applies to: Colorado
    Replied: 6/27/2011
    Ursula G. Barrios Law
    Ursula G. Barrios Law | Guillermo Machado
    Only if you raise a 523 claim in an adversary proceeding and prove it.
    Answer Applies to: California
    Replied: 6/27/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    A promissory note is a dischargeable debt in bankruptcy. An exception to discharge would be if the debt was incurred by fraud or misrepresentation.
    Answer Applies to: California
    Replied: 6/27/2011
    Cartwright Law Firm
    Cartwright Law Firm | Andrea Cartwight
    Based upon the facts you have presented, unfortunately, the debt would be discharged in bankruptcy. There are a new exceptions to discharge: fraud, misrepresention or concealing assets. Unless any one of these elements are present then the debt would be discharge. Good luck.
    Answer Applies to: Michigan
    Replied: 6/27/2011
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    When you loan money you take the risk that the debtor will file bankruptcy. As a general rule, you lose out and can be sued and severely sanctioned if you ever make any effort to collect. See a lawyer to be sure, but your money is probably toast.
    Answer Applies to: Georgia
    Replied: 6/27/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    Only if they did something fraudulent. What exactly have they done that is fraudulent? Sounds as if life kind of kicked them in the butt, what with BOTH losing their jobs and then losing their house on top of it. Given those facts, not sure what they did that was fraudulent - those are the exact circumstances for which bankruptcy was designed.
    Answer Applies to: California
    Replied: 6/27/2011
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