Should I file bankruptcy and have $35k in debt discharged, or take a loan from a family member?

That's a very difficult question for anyone but you to answer. Avoiding bankruptcy is often a good decision, but many times, people are much better off filing and getting on with their lives. There are just so many factors in play. One of the biggest issues in your case isn't actually with you, but rather with your relative. They are putting themselves in a potentially bad position by taking out a loan in THEIR name for YOUR debt. What happens if in a couple of years you lose your good job or get injured or get in a bad relationship, etc. and can no longer pay the $400? You will be fine, but now your relative is stuck. If they understand all the risks, I suppose that's their decision to make, but the thought should at least cross your mind. If they are intent on helping you, I'd at least consider trying to use the money from the relative to settle your debts rather than pay in full. You get out of debt faster, and your relative is exposed to less potential debt on their part. Best thing to do is sit down with a good bk/debt settlement lawyer to really know how it all works. A good attorney can help you okay out all scenarios.

There are a lot of factors to consider here. Having a family member who will help you out and avoid bankruptcy is great. However, what happens if you lose your job or become ill after the you repay your debt? It is not just that you have a family member loaning you money; your family member is taking a risk by taking out a line of credit on their house. If you miss a payment or cannot pay for an extended period of time, will the family members still be able to make the payments and live in their home? Another major question is why did you get into debt? If you are currently in debt and nothing has changed, consolidation is not changing the problem and it is likely you will be in debt in the future and still owe your family member. However, if the debt stems from a resolved problem, like a job loss or medical bills, then consolidation may be a decent option. Finally, you also need to look at what type of debt and assets you have. Is it all unsecured credit cards or medical bills or is there a car loan? Do you any assets that could be at risk in a bankruptcy? All things an attorney should discuss with you and help you make a determination on what the best decision for you is. Bankruptcy is not right for everyone, and often their are alternatives, like borrowing from family, that will be a better solution. A bankruptcy consultation is usually free and will give you a better understanding of what your options are. Since you say you already got a lawyer, then if you have already have had your initial consultation, you should discuss this new option with him or her. The attorney will be able to analyze your situation as a whole, not just the limited information provided above.

Some of the factors that we review with our clients are: 1) total amount of unsecured debt such as credit card debt, medical bills, personal loans, old utility bills, etc.; 2) total amount of secured debt such as auto loans, house mortgages and loans that have other items as collateral; 3) your projected income and expenses and you means test income and expenses, which considers your average income over the past 6 months; 4) what assets do you own that are exempt and what assets that you own that are not exempt; 5) is your income subject to being garnished by a judgment creditor if you decide not to file; and 6) your current credit score, which if it is already extremely low now, your score could be helped by filing and doing the right things to rebuild your credit after entry of the discharge order in your case. The biggest worry about using a family member to borrow $35,000.00 is what will happen if you are injured or become ill an your income drops to a point that you cannot pay the debt back for your family member. There is a saying that you should never loan money to friend or family member because you will ruin his memory. Sometimes it is not that the memory is ruined, it is the fact that the family member cannot pay the loan. Do you want to risk ruining a relationship with a family member if that happens?

Owing a financial institution when you are struggling to pay is uncomfortable; but owing a family member is even more so. Since the family member will need to take out a loan, he or she obviously cannot afford to help you without some level of risk. You got yourself into this situation, and you should get it under control yourself, while learning from the experience - without putting someone else at risk. The benefits of filing often depend on the type of debt (i.e., secured, unsecured, priority [taxes?] and your income an assets, exemptions and other factors. If you don't own a home or any non-exempt property, and your debt is unsecured, Chapter 7 would get you off the hook without dragging a family member into it. If you can afford $400 per month, a Chapter 13 would allow you to pay part of your debt, and would be on your credit report for 7 years - as opposed to 10 for Chapter 7. If you cut a deal with your creditors for a reduced amount, it will be reported as "settled" rather than "paid as agreed", which would affect your credit the same as a Chapter 13. The problem with that, however, is that credit card companies and banks won't usually settle for less than the full balance while you're current on your payments. [Why should they?] You should consult with an EXPERIENCED bankruptcy attorney who can evaluate your situation and explain your options. Based on the limited information you've provided, either form of bankruptcy would appear better than borrowing from family.

I have seen many disasters over the years where someone borrows from a family member and in particular where that family member is borrowing the money and securing it against their home. Perhaps you can afford that payment today, but what happens in the event something happens to you and the relatives can't afford the payment? I could never advise that someone should do that to a family member. As a consumer bankruptcy attorney for many years, I have had both sides of this picture. I've had the family member ask me what they do when they are no longer getting paid. How do they get rid of the debt on their house? The answer is that they almost never can get rid of it. Failure to pay could mean they lose their house. On the other side, if you later decide to file bankruptcy and have been paying $400 per month consistently for at least a year, the family members would not only have the debt you owe them discharged by your bankruptcy, but they will likely owe the trustee in your bankruptcy a year's worth of the payments that you made to them or on their behalf! Not a pretty picture at all. If you have debt you can't pay, take the advice of an experience bankruptcy attorney. If you have had an attorney review your case and they have explained to you that a bankruptcy would work for you, you should probably follow that advice and leave your family members out of your problems.