June 1, 2012
Quite often a client will want to characterize money they received from a relative as a loan, when in reality it is probably a gift. In bankruptcy, transactions between related individuals are probably more carefully scrutinized than any other type of transaction. How the parties label a transaction is irrelevant. The court will look to the character of the transaction when determing how to label it.
The factors a court will consider may include any of the following:
Is the agreement in writing?
Does the agreement include interest on the debt?
Is there a fixed repayment schedule?
Is the loan secured by collateral?
- What is the payment history?
- What was the prospect of repayment?
- Did the conduct of the parties suggest that this was a loan?