How can I protect my promissory note from being discharged in bankruptcy court? - Bankruptcy Law Questions and Answers- LawQA.com

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How can I protect my promissory note from being discharged in bankruptcy court?

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?

Mercado & Hartung, PLLC
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You can file a proof of claim in her BK as long as it's timely.

Answer Applies to: Washington
Replied: 6/29/2011

Answer By Asaph Abrams
Law Office of Asaph Abrams
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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: 6/27/2011

Answer By Evan M. Altman
Evan M. Altman Attorney at Law
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Too late at this point.

Answer Applies to: Georgia
Replied: 6/27/2011

Answer By Janet Lawson
Janet A. Lawson Bankruptcy Attorney
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Not likely. You would have to prove they committed fraud to get the loan from you.

Answer Applies to: California
Replied: 6/27/2011

Rosenberg & Press
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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: 6/26/2011

Burnham & Associates
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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: 6/26/2011

Answer By Alan D. Walton
Breckenridge and Walton
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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: 6/25/2011

Law Office of Maureen O' Malley
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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: 6/25/2011

Answer By Jeffrey Badgley
Badgley Law Group
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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: 6/25/2011

Answer By Mark Markus
The Law Office of Mark J. Markus
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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: 6/24/2011

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