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Old 07-08-2010, 02:08 PM
 
Location: Las Vegas
14,229 posts, read 30,088,309 times
Reputation: 27689

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Don't ever do what I did. Ever. I need to go have stupid tattooed on my forehead. I hope all of you learn from my mistake.

I loaned a friend 7K. I got a letter from the Bankruptcy Court today that she has filed Chapter 7. It was just a loan between friends so I have no paperwork to use to file a proof of claim. I guess I just lost all that money I worked for. Every last cent.

Sad thing is she is now better off than I am. She is working at Microsoft and marrying a wealthy man in 3 weeks. I'm sure filing the bankruptcy was a condition of the marriage. If I was him, I would have done the same thing.

So here's my question. Can I write this loss off my taxes since the government is giving her permission to skip on her debts? I certainly suffered a loss.
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Old 07-08-2010, 02:14 PM
 
Location: Denver, CO
1,921 posts, read 4,781,941 times
Reputation: 1720
If she was truly a friend she would gift you the 7k back.
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Old 07-08-2010, 02:23 PM
 
28,453 posts, read 85,548,210 times
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Nice. Screw over your friends, file a bk, probably sign an ironclad prenuptial. Gonna get lots of sweet gifts I am sure...
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Old 07-08-2010, 02:29 PM
 
Location: Spokane via Sydney,Australia
6,612 posts, read 12,857,493 times
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If you got a letter from the BK Court, presumably she has listed her debt to you on her filing documentation, so at least you have "proof" that she owed it to you.

Chapter 7 isn't as easy to declare these days, especially if she has decent disposable income, they may deny her and make her file Chapter 13 instead.
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Old 07-08-2010, 02:36 PM
 
Location: Skokiewood
732 posts, read 2,985,669 times
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Getting to your actual question, in order to claim a bad debt loss for tax purposes, you need to show that you intended to make a loan and not a gift (i.e., that you always expected the loan to be repaid) and that the debt is totally worthless (this is the rule for non-business bad debts, which I'm assuming is the case here).

If you meet both of these criteria, you may deduct the loss; it's treated as a short-term capital loss in the year that it became worthless. However, based on your lack of documentation you will have a problem proving that there actually was a loan if your claim is ever examined.
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Old 07-08-2010, 02:46 PM
 
1,955 posts, read 5,273,255 times
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Quote:
Originally Posted by Thepreacherswife View Post
However, based on your lack of documentation you will have a problem proving that there actually was a loan if your claim is ever examined.
Wouldn't the letter from the BK court suffice as documentation? If a judge writes off that debt, then by default is that not a ruling affirming the loan was in fact a loan?
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Old 07-08-2010, 04:09 PM
 
9,846 posts, read 22,713,364 times
Reputation: 7738
Quote:
Originally Posted by yellowsnow View Post
Don't ever do what I did. Ever. I need to go have stupid tattooed on my forehead. I hope all of you learn from my mistake.
No don't worry I never will.

I've never done it myself and never will. Seen too many people get burned too many times.

My viewpoint is if you give people money do it as a gift and don't expect the favor to be returned.
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Old 07-08-2010, 04:16 PM
 
48,502 posts, read 97,009,245 times
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That is sad but she was likely never really a friend. But you certainly where to her. I would just take confort i teh old saying that what goes around;comes around. Its just a matter of time.OI thnik we have all had problems like this tho maybe not as costly but its nothing that is wrong with you.;its her.
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Old 07-08-2010, 07:01 PM
 
Location: Las Vegas
14,229 posts, read 30,088,309 times
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Quote:
Originally Posted by Opyelie View Post
If you got a letter from the BK Court, presumably she has listed her debt to you on her filing documentation, so at least you have "proof" that she owed it to you.

Chapter 7 isn't as easy to declare these days, especially if she has decent disposable income, they may deny her and make her file Chapter 13 instead.
I can hope but not likely. The majority of what she owes is most likely medical related and I was told medical bills are the easiest to get through bankruptcy. But, as I said, there's always hope.
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Old 07-08-2010, 07:02 PM
 
Location: Las Vegas
14,229 posts, read 30,088,309 times
Reputation: 27689
Quote:
Originally Posted by StoneOne View Post
Wouldn't the letter from the BK court suffice as documentation? If a judge writes off that debt, then by default is that not a ruling affirming the loan was in fact a loan?
I'm hoping this is true.
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