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Hi group, I hope this is appropriate. My parents are loaning my brother and
his wife a substantial amount of money to pay their mortgage to avoid
foreclosure. They will not be charging him interest. And as soon as his
business goes into bankruptcy and he gets a job, they want repayment to
begin. I have been looking around the internet and did find something that
I've been tailoring for them; does this look like the right sort of form or
can someone point me in another direction? Thank you in advance....
http://www.ilrg.com/forms/consloan.html
--
Robin
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Robin
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"RobinB." <izzy54@excite.com> wrote:
Hi group, I hope this is appropriate. My parents are loaning my
brother and his wife a substantial amount of money to pay their
mortgage to avoid foreclosure. They will not be charging him
interest. And as soon as his business goes into bankruptcy and
he gets a job, they want repayment to begin. I have been looking
around the internet and did find something that I've been
tailoring for them; does this look like the right sort of form
or can someone point me in another direction? Thank you in
advance.... http://www.ilrg.com/forms/consloan.html
The form's satisfactory. It's not the problem.
One problem is that if no interest is charged, the IRS will "deem"
interest, and someone may end up having to pay income tax on
interest that was never charged.
Next, if your brother files bankruptcy, it will wipe out his legal
obligation to repay your parents. You may not see it as a problem.
But the odds are that it will become one. To protect themselves
your parents should also have your brother sign a mortgage or deed
of trust.
Finally, if the amount of equity your brother has in the property
(including the amount your parents lend him if they don't get
security) equals or exceeds the homestead exemption allowed in your
state, the bankruptcy court may take the home and sell it. Your
parents might be better off simply buying the house from your
brother, and selling it back to him after he files bankruptcy.
Stu
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Hi group, I hope this is appropriate. My parents are loaning my brother
and
his wife a substantial amount of money to pay their mortgage to avoid
foreclosure. They will not be charging him interest. And as soon as his
business goes into bankruptcy and he gets a job, they want repayment to
begin. I have been looking around the internet and did find something that
I've been tailoring for them; does this look like the right sort of form
or
can someone point me in another direction? Thank you in advance....
http://www.ilrg.com/forms/consloan.html
--
Robin
egads, Robin, this could get really messy, depending upon how reliable a
character your brother is and what kind of earning capacity he has ... are
they really trying to make a secured loan, as suggested by the form you link
to ? it's not clear whether they are lending this "substantial amount" to
pay off the first mortgage in full or if they are essentially giving him a
second mortgage loan. Either way, if they want to make a loan secured by
the house, they'll need more than what you've linked to (although that does
make a reference to a security agreement at the bottom of the page) ... but
it also still has to be perfected to be enforceable.
Perhaps it would be better for them to take title to the house and lease it
to him ... but there may be adverse consequences there in terms of loss of
the mortgage interest deduction on his/her federal tax return, which you
probably know can be substantial ...
when he gets a job, is he going to be able to pay off two lenders ?
Don't consider any of this to be advice; there are too many unknowns here.
Do consider it a quick discussion of a few issues; the advice is to get
local expert help on this; among other things, they should probably have a
look at the terms of his first mortgage ... not doing so could cost a lot
more than the advice in the long run, which I presume may ultimately affect
your own inheritance.
I guess I should say that if this "substantial amount of money" really
amounts to, say, 4-6 mortgage payments of $1-2K each all of this might well
be handled with a lot more informality ... just use a standard promissory
note for an unsecured loan. Understand that they may never be repaid.
Good luck.
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RobinB. wrote:
Hi group, I hope this is appropriate. My parents are loaning my
brother and
his wife a substantial amount of money to pay their mortgage to avoid
foreclosure. They will not be charging him interest. And as soon as
his
business goes into bankruptcy and he gets a job, they want repayment
to
begin. I have been looking around the internet and did find something
that
I've been tailoring for them; does this look like the right sort of
form or
can someone point me in another direction? Thank you in advance....
http://www.ilrg.com/forms/consloan.html
--
Robin
You should not do that unless you are a licensed attorney because it
would likely be considered the practice of law. Not only can you get
in trouble for practicing law without a license, but you could
conceivably get your parents, brother, and/or sister-in-law in trouble
with a loan agreement that doesn't suit their circumstances or plans.
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"RobinB." wrote in misc.legal.moderated:
Hi group, I hope this is appropriate. My parents are loaning my brother and
his wife a substantial amount of money to pay their mortgage to avoid
foreclosure. They will not be charging him interest.
Are they aware that there may be tax consequences? The IRS may
regard the loan AS THOUGH interest had been paid, i.e. interest
income to your parents and an interest deduction for your brother
and his wife. I'm not a tax expert, but if the money is substantial
then so are the potential tax consequences and they ought to
investigate it before going forward.
--
If you e-mail me from a fake address, your fingers will drop off.
I am not a lawyer; this is not legal advice. When you read anything
legal on the net, always verify it on your own, in light of your
particular circumstances. You may also need to consult a lawyer.
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com
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