It is generally not a good idea to repay debts owed to relatives before filing for bankruptcy. In both Chapter 7 and Chapter 13, you must disclose payments made to relatives before your bankruptcy filing. Payments made to relatives before a bankruptcy filing are considered preferential payments and the trustee in your bankruptcy could require the relatives who received the payment to return that money to the bankruptcy estate. In a Chapter 13 case, you could be required to pay more to your creditors as a result of paying relatives before you file for bankruptcy. For these reasons, it is always a good idea to consult with an experienced bankruptcy attorney before making any payments to relatives if you think that you might be required to consider a bankruptcy filing in the future.
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