Can Personal Loans Be Included in Bankruptcy? Know Your Debt Status

You may be wondering which of your Personal Loans can be included in bankruptcy. For the question, can personal loans be included in bankruptcy? the answer is yes, but not in all cases. Bankruptcy eliminates most, if not all, of what is referred to as ‘unsecured’ debts. These include credit cards, lines of credit, personal loans, payday loans as well as income tax debt. Where you file for bankruptcy, you will no longer have to bother about repaying these debts.

However, there are certain types of debt that cannot be eliminated by filing for bankruptcy. This means that, even after you complete the bankruptcy process, you will still be responsible for repaying the following debts:

Secured debts, like a mortgage or car loan

These types of debts are guaranteed by an asset (your home or car), thus you need to keep making payments, otherwise, your creditors can repossess your vehicle or property.

Child support or alimony

These payments have to continue even if you file for bankruptcy. If you default on your payments, your former spouse or partner will be considered a preferred creditor in your bankruptcy claim.

Student loans, if you have been out of school for less than seven years

You can include your student loan debt in bankruptcy if it’s been more than seven years since you were a full-time or part-time student.

ALSO READ:  Is Your Salary on Your Credit Report? What is Included in Your Report?

Any court fines, penalties, bail bonds, or restitution imposed from a criminal or civil trial

Any debts as a result of fraud, embezzlement, or misappropriation

This includes any debt related to property or services obtained through fraud.

Filing for Bankruptcy

There are two ways of filing for bankruptcy. The first is Chapter 7 bankruptcy, which involves the cancellation of most or all debts, based on which debts are considered dischargeable. However, it is possible that in the case of Chapter 7 bankruptcy, also referred to as “liquidation bankruptcy”, the bankruptcy trustee liquidates or sells the property of the debtor filing for bankruptcy in order to repay all or a portion of his or her debts to creditors.

Some personal property is exempt from liquidation in a Chapter 7 bankruptcy, even though there are limits on the value of the exemption. Here are examples:

Chapter 13 bankruptcy is sometimes referred to as “reorganization bankruptcy”. In the case of a Chapter 13 filing, a court-mandated repayment plan is I action. Where the plan is carried out to the satisfaction of the court, additional debt may be canceled or forgiven. The debtor’s property is not confiscated neither is it sold to raise money in a Chapter 13 bankruptcy.

Differences Between Types of Bankruptcy

Chapter 7 bankruptcy is quite different from Chapter 4 bankruptcy in the following ways: In Chapter 13 bankruptcy the debtor keeps their property with the understanding that they are to pay back all or a portion of the debts over a three to five-year period. Also, Chapter 13 bankruptcy enables a debtor to retain assets and recover from bankruptcy fast, as long as the debtor is able to meet the terms, like earning enough income to repay the debt timely.

ALSO READ:  www.irsstimulus.com – IRS Stimulus Relief Check Portal

On the other hand, Chapter 7 bankruptcy can have an effect on a debtor who has a sizeable asset base. Although it is a good option if the debtor’s asset base is small and the amount of debt can’t be paid. It can allow debtors to very quickly have a large amount of debt discharged. Chapter 7 bankruptcy is mostly for people with sparse income who cannot pay back a portion of their debts.

With a Chapter 7 bankruptcy filing, debts can be wiped clean once the court has approved the filing. However, the process may take several months. On the other hand, with a Chapter 13 bankruptcy filing, unsecured debts are not wiped clean. Rather payments have to be made according to a plan mandated by the court. Immediately you reach the end of the plan and all payments have been made, any leftover debt is wiped clean.

Social Media: Facebook, Twitter, Wikipedia, LinkedIn, Pinterest

LEAVE A REPLY

Please enter your comment!
Please enter your name here