Loaning Money to a Friend
January 13, 2004 9:32 AM   Subscribe

I have a friend -- no really, it's not me -- who recently filed for bankruptcy. He needs a short-term loan for a couple thousand dollars. Anyone able to give me some advice to pass along? [more inside]

I'm not in a position to co-sign for him (I'm about to buy a car), but I want to let him know what he's likely to encounter.

Is a co-sign his only option? Should he talk to a bank or just put it on his credit card? Will he be able to get a reasonable interest rate? Any pitfalls he should he look out for?
posted by me3dia to Work & Money (28 answers total)
he has a credit card? Wow, well, if he's thinking about putting $2000 on it so soon after declaring bankruptcy, that sounds like one of the "pitfalls he should look out for."

Having said that, his options depend on what he needs the money for--some car places and retail stores will finance purchases as long as you can prove you have a job and a residence (you usually have to produce a paystub and a utility bill with your name on it). If he needs the cash, I don't know what to tell you.
posted by whatnot at 9:55 AM on January 13, 2004

I don't know if he has a credit card -- it was an assumption. Unfortunately, he does, indeed, need the cash; the money is to pay back a loan from his father, who is suddenly expressing his asshole gene.
posted by me3dia at 9:59 AM on January 13, 2004

Can't he sell or pawn anything? I suspect that anyone who'd loan a brankrupt $2,000 would have an asshole gene that would make his father look like Santa Claus.
posted by timeistight at 10:13 AM on January 13, 2004

Uhm, I don't know your friends situation, but could he get some work? Is he already working? Showing his father he's working to resolve this might remove some of the 'assholism' he's experiencing. I guess if I had lent cash to someone who then went bankrupt, I too might assume that the bankrupt person was flaky on paying back debts and loans, and would want to get my money back ASAP. But it's difficult to comment more without knowing the full story, not that I'm encouraging you to post it here ;-)

On preview - or yeah, sell something. Ebay, second hand book/cd stores, etc.
posted by carter at 10:15 AM on January 13, 2004

There so little information here about your friend's situation that it's difficult to help. Does he work? Does he have any liquid assets at all? (bank accounts, securities) Does he have a tax refund coming this April? (Filed electronically, these can come back pretty fast). Does he own a home? Does have have any credit cards? Does he have any marketable skills that can generate cash quickly (i.e., construction trades)
posted by luser at 10:37 AM on January 13, 2004

His dad loaned him money to move back to the upper Midwest from the West Coast -- Southern California (and a bad car) bankrupted him. He has a good-paying job now in which he telecommutes, and wants to move -- in February -- to Chicago where prospects for a social life are a bit more promising. This pissed his dad off, and now he wants his money back before my friend moves. So the loan would pay off his dad and leave him with enough money to move without zeroing out his funds. He'll have plenty of cash soon after he moves, so it would be a very short term loan.

How common would it be for an employer to give a large advance on pay? I could see this as a last-ditch option, but I don't know if it's realistic.
posted by me3dia at 10:39 AM on January 13, 2004

Ah. He should tell his Dad to shove it until he starts making some cash.
posted by monju_bosatsu at 10:51 AM on January 13, 2004

If I had a good paying job and wanted $2000 quickly, I'd eat rice and beans for a month, cut off the cable, etc., and save a good chunk of the money. If the only reason he's moving to Chicago is for his social life, can't he wait? He could also sell all large, furniture-type possessions (= cash, and less moving/shipping fees). Did his dad loaned him the money to be near the family, and now your friend is moving somewhere else?
posted by carter at 10:54 AM on January 13, 2004

This is a long shot, but - has he been unwittingly contributing to a 401(k) at his job? Short term loans, especially in emergency situations, against a 401(k) balance are very easy to obtain.
posted by PrinceValium at 10:57 AM on January 13, 2004

If he has a good paying job, he may have a decent refund due from the IRS. He should file now, electronically. He could have the cash in a week.
posted by luser at 10:59 AM on January 13, 2004

Yes! Or, move his stuff to a storage locker, get a Greyhound home, give the money to his Dad, and come back and get his stuff when he's flush again.
posted by carter at 11:01 AM on January 13, 2004

me3dia, you asked, "How common would it be for an employer to give a large advance on pay?"

Not. Employers used to do this more, but got screwed by employees who would leave right after an advance. The company has very little legal recourse to get the money back.

Their response would probably be, "Why finance his move just to have him quit, owing us money that we'll never see?"
posted by pomegranate at 11:29 AM on January 13, 2004

I must be missing something, but I can't file a tax return until I get my W4's, which I don't get until the beginning of February at the earliest. Can you file a return without W4's?
posted by ajpresto at 11:34 AM on January 13, 2004

Your employer should have your W4 in your hot little hands by January 30th. (It's the law.) Nope, can't file a return without a W4.
posted by pomegranate at 11:58 AM on January 13, 2004

What, if any, are the consequences for your friend if he does as monju says and just moves anyway, paying his dad back when he can?

(Not just legal consequences, but what's your sense of what that would do to family relations, etc -- would people recognize that it's just his dad being an asshole?)
posted by ROU_Xenophobe at 12:03 PM on January 13, 2004

Yes, you can file a return without a W-4. A W-4 is what you give to your employer to tell them how much withholding to do. What you need to file a return is a W-2. Remember, you're dealing with the government, so the forms aren't numbered in the order you need them, but backward from that.
posted by kindall at 12:33 PM on January 13, 2004

Yes, Kindall is right. Oddly, I'm processing the W-2's for my company TODAY and I still can't get the names right.
posted by pomegranate at 1:14 PM on January 13, 2004

I'd rather not get deep into the interpersonal politics of the situation -- it's not my place to describe my friend's conflict with his dad in a public forum, and it's not all that relevant to my question anyway. The last thing I need is for him to stumble onto this thread and recognize himself.

The 401k and early tax filing suggestions are good -- thanks. I'll also suggest he turn to his credit card (if he has one) for a short-term loan.

Thanks for your help, everyone.
posted by me3dia at 1:36 PM on January 13, 2004

I'm an idiot. I meant W2. So, can't file early without getting that piece of paper in the mail (typically). Which sucks.
posted by ajpresto at 2:14 PM on January 13, 2004

If he isn't out of bankruptcy, paying off his father before dealing with other creditors might be seen as preferential treatment and could get him into a lot of trouble. If he hasn't been discharged, he can't pay off one loan ahead of the others, whether or not dad is being an asshole. But the states seems to have 87 different types of bankruptcies, so I'm just stating that as an FYI.
posted by Salmonberry at 2:49 PM on January 13, 2004

One other long-shot: does he have a life-insurance policy that he can either borrow against or cash-out?
posted by davidmsc at 3:35 PM on January 13, 2004

His dad loaned him money to move back to the upper Midwest ... He has a good-paying job ... and wants to move ... to Chicago where prospects for a social life are a bit more promising. This pissed his dad off, and now he wants his money back before my friend moves.

I think I'm siding with dad. "Pay me back for move A before you spend money on move B" doesn't seem unreasonable. Having filed bankruptcy and borrowed significant money from his dad, Friend might consider starting to exercise better fiscal responsibility -- by staying put until he can pay off his debt and then save for the move. Robbing Peter to pay Paul for the sake of a "social life" is the kind of short-sighted behavior that leads people to bankruptcy in the first place.
posted by Tubes at 3:39 PM on January 13, 2004

Got my W-2 today, in fact.
posted by kindall at 4:29 PM on January 13, 2004

I offer one other option to consider. My credit union gives 6-month loans (for tuition assistance). You don't have to pay interest during the term of the loan -- and the interest rate is very low. If he could join a credit union that offers similar loans, that might solve his problem.

A lot of credit unions are actively trying to increase their memberships, and so the rules for becoming a member are increasingly lax. And I'll tell you, credit unions are so much nicer than banks.
posted by acridrabbit at 5:12 PM on January 13, 2004

Acridrabbit, are there limits to how soon you could get one of those loans? He'd probably join one tomorrow if he could get the money right away, but I wonder if there might be a probationary period for such a deal.
posted by me3dia at 6:48 PM on January 13, 2004

If your friend has recently filed (not discharged) for a BK, he'll have to inform any potential lender (it'll be on the application) and he's up the creek for getting a loan.

If the BK is recently discharged (2 years or less depending on the lender) he's up the creek for getting a loan.

He might be able to get a credit card.
posted by deborah at 7:44 PM on January 13, 2004

I meant W2. So, can't file early without getting that piece of paper in the mail (typically)

You can file, you just can't get back whatever you claim you paid to the government in withheld taxes.

And the IRS will send you a little form stating as much, and asking you to send in your W-2 already.

I worked for the IRS last year as a tax examiner fixing tax returns, and I start again this year on Tuesday. We did the above all the dang time.


You wouldn't believe how many geniuses put "$0" on their tax returns for the amount of tax they owe. Like they think that's gonna get past us...

Oh yeah, and if you want to make several IRS workers smile, put cute stickers on your return or print it out on festive paper! (Just make sure the whole thing is readable)

posted by beth at 8:03 PM on January 14, 2004

I'm sorry to be an idiot here, but....

You can send in like an estimate of what you owe and whatnot without a W2? Does that speed it up in anyway? Or just slow it down?

I'm really intrigued in the whole tax thing, so sorry...
posted by ajpresto at 6:45 AM on January 16, 2004

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