A young man in Wisconsin (now 18) took loans from his mom to cover costs of mechanic tools and vehicle purchases while getting established as a mechanic. The total is about $13,000. He was 17 at the time that he took these personal loans from his mother. They were made in good faith with a plan to repay her over the course of 5 years.
Now he's moved out on his own, steadily employed, and making good decisions, breaking unhealthy cycles that his family is in. However, mom is facing bankruptcy and honestly reported that she made these loans to her son. He is worried that he'll be required to suddenly pay back the whole amount that he borrowed from mom. He was planning on 5 years, and cannot afford a much shorter time frame.
Should he also be talking to an attorney? Could he be held liable or have his newly established credit hurt by the situation?
Wisconsin young adult took out loans as a 17-year-old. Parent is now facing bankruptcy. Is he on the hook to pay back her creditors immediately?
byu/flunky_the_majestic inpersonalfinance
Posted by flunky_the_majestic
9 Comments
NAL but bankruptcy trustees usually can’t force immediate repayment of legitimate family loans with reasonable terms. The original 5-year agreement should still stand since it was made in good faith
That said, definitely worth talking to a bankruptcy attorney for a quick consultation – most will do 30 mins free and this is exactly the kind of thing they deal with all the time
Minors cannot generally be legally liable for contracts. So you’ll be fine.
Unless there is extensive documentation I highly doubt that a loan to their minor child will be considered in the bankruptcy. They will likely just view the money as gone and a gift. It would be ethical to repay on the original terms if that is the agreement.
Unless the minor child was legally emancipated before the loan contract was executed, they’re unenforceable in any context since minors can’t sign binding contracts.
No, the bankruptcy would not impact the terms of the loan.
If your bank files bankruptcy it doesn’t mean your loan is called due.
Your parents should bring this up early and ask their attorney how to handle it. As some people suggested this might not be a legally binding contract. Perhaps the attorney says to stop the repayments for now because those deposits could cause red flags in their bankruptcy filing.
If there is nothing in writing she can’t prove he took the loans and he should continue with the 5 year plan but document every payment, maybe use checks or PayPal, he may need proof.
Her bankruptcy should not accelerate his debt to her. Are these loans written down and signed?
If they are a minor, that was a gift with the request to pay it back. The parent is not a formal creditor, they loaned money to their child but more in the “please pay it back way”.
NAL but, can a 17 year olds enter into legally binding contracts? 5 years would be the original agreement, but can that be upheld?