Personal loans are loans from friends, family or lenders that can be used for any purpose, such as paying off debt or financing a large purchase. For example, you may have borrowed money from your parents to pay for your wedding, or you may have asked a friend to help cover the down payment for your car. At the time, you probably had every intention of paying back the money. But what happens when you’re faced with financial difficulties and can no longer pay back your personal loan?
Fortunately, personal loans are usually dischargeable, meaning that they are forgiven in bankruptcy. There are two main ways you can file for bankruptcy: Chapter 7 and Chapter 13. It’s important to understand the differences between the two types of bankruptcy, as this could affect what you have to pay back.
Personal Loans Bankruptcy: Navigating Chapter 7 and Chapter 13
When exploring Chapter 7 and Chapter 13 bankruptcy, it’s important to speak with a qualified attorney. This professional can break down the pros and cons of each type of bankruptcy, along with other options to consider, such as debt consolidation. You’ll be able to walk away knowing what your best options are.
Chapter 7 bankruptcy is also known as “liquidation bankruptcy” because the trustee sells the property and uses the cash to pay the creditors. It’s the most popular type of bankruptcy because it wipes away most debt, including personal loans. But you wouldn’t file bankruptcy just for an outstanding loan. You can also discharge other debts such as credit card bills and medical bills.
Chapter 13 bankruptcy is often referred to as “reorganization bankruptcy.” Instead of discharging all your debts, you’re put into a court-mandated repayment plan for 3-5 years. Once you make your payments and satisfy the courts, the remaining debts are discharged. Chapter 13 bankruptcy is the less popular option because individuals still have to make payments for several years.
Discharging a Personal Loan
When you borrow money from someone and agree to pay it back, the borrower holds you responsible. Unfortunately, life can be unpredictable at times. What you thought you could do may no longer be an option. The good news is that if you’re facing financial hardship, your personal loan can likely be discharged in bankruptcy. And, once you file bankruptcy, it’s entirely possible to obtain a personal loan again. Of course, we don’t recommend that if you’re unable to pay your bills. Plus, you can expect the interest rates to be high and the loan terms to be unfavorable.
Schedule a Consultation Today
Bankruptcy can be complicated, but it’s a process that most people are happy they went through with. Whether you file a Chapter 7 or Chapter 13 bankruptcy, you can expect quick relief. In fact, we place an automatic stay on creditors so they can no longer contact you! In most cases, personal loans can be discharged, and you will no longer be responsible for paying them. To discuss what type of bankruptcy is the right choice for you – Chapter 7 or Chapter 13 – contact The Law Office of William Waldner today.