is it required by law to return money on a loan that was repaid beofre the debtor filed bandrucpry?

Question

we loaned some money to a family member. they repaid us. they have since filed bankrucpty and the trustee has sent us a letter stating that we need to return the money. are we leaglly responsible to return money that was ours to begin with? trustee says they can go back for 1 year of the family members debts and ask for them to be returned so that the creditors holding notes can be paid first. as far as we know the bankrupcty was not filed until after the money was return to us and there was no note held on the loan it was done in good faith. if we are leaglly responsible to return the money what are the legall actions that can be taken against us if we do not?

Answer 1

The Trustee must think that your family member and yourself was involved in fraudulent conveyance, or fraudulent transfer. More than likely if you can prove that it was indeed a loan to the family member and subsequent repayment of that debt, then I would think that they couldn't require you to pay it back.

Answer 2

Yes, unfortunately, this is basically how the bankruptcy law works. I know that's not the answer you were hoping for, but the court has to watch out for bad guys. Unscrupulous people sometimes try to move their property or money out of their name and into others' before they file a bankruptcy. That way, the court has a smaller amount to divvy up among the creditors, so each of them gets paid less than they would ordinarily get in the bankruptcy (which is still not very much). The really bad ones will then get back their money and property, so they get the protections of a bankruptcy without really doing what is expected of them to repay what they can of their debts.

In order to prevent fraud and unfair preference of some creditors over others, the courts will enforce a "look back" period in which payments that have been made by the petitioner can be (and almost always are) pulled back by the trustee to be split up among all the creditors in the manner prescribed by the court.

(Despite what others have suggested here, this process is perfectly normal, and it in no way suggests that the court, the trustee, or anyone else suspects that you were involved in a fraudulent transaction. You are unfortunate in this, not guilty.)

The trustee could invoke the power of the court to force you to comply, if necessary, and I promise you that you don't want to be staring down the barrels of a federal court's rifle that way. Trustees often know that this is a trauma and a shock to people who have never experienced it before, so hopefully he will take it easy on you and give you as much time as possible. You really will need to do what he says, though, as best you can. If you are seriously unable to do so immediately, you should contact the trustee and see what can be worked out in terms of getting you some time or maybe some reduction in what must be returned.

You should also inquire about being listed as a creditor yourself, it sounds like. This might result in you getting back a small (usually very small) percentage of the money you were owed.

I really wish I had a happier reply for you. It wouldn't be a bad idea for you to talk with a locally licensed attorney about this. I hope you -- and your relative -- get through it ok.

Answer 3

No, this money does not have to be returned as there was no note signed for repayment. As far as you are concerned it's your word against the Trustee adn your friend. Keep the M-o-n-e-y!

Answer 4

Absolutely not. That money is yours. The trustee is way off base. You loaned the money, the money was paid back, end of story.

The absolute worst thing they can do is to sue you for the money back. They can't get you for punitive damages or anything like that.

You're being shaken down. Don't fall for it.

Answer 5

you will have to see an attorney, read the bankruptcy court documents, this will spell out all terms and conditions of the bankruptcy

Answer 6

no