Personal loans are loans that you take out from a bank, credit union or other lender. Typically, these loans are for a set amount, unlike credit cards which are a revolving line of credit. In most cases, personal loans are unsecured and there is no collateral. This means the lender has nothing but your word to guarantee repayment, and there is no asset that can be seized if you do not pay.
Personal loans are generally eligible for discharge during bankruptcy. This means that if you get into financial trouble, you may be able to avoid paying back some or all of your personal loan. An experienced attorney at Ronald D. Weiss, PC can help you to understand how bankruptcy will help your debt problems and can assist you with your bankruptcy filing.
The impact of bankruptcy on your personal loans is going to vary based upon which chapter of bankruptcy you file. Consumers generally have two different options: filing for Chapter 7 bankruptcy protection and filing for Chapter 13.
Chapter 7 allows for debt discharge after an asset sale. Any non-exempt assets you have will be sold and the proceeds generated will be distributed by a trustee amongst your creditors. Some of the personal loan debt you have will likely be repaid this way, assuming you have assets to sell and assuming the entire proceeds of the sale don’t go to priority creditors. Once whatever money is available is paid to the lender, the remaining balance on your personal loan is forgiven.
Chapter 13 allows for debt discharge only after you have repaid a portion of your debts as part of a repayment agreement. The creditors must agree to your repayment plan created as a part of the bankruptcy filing. Typically, a Chapter 13 repayment agreement lasts anywhere from three to five years with your monthly payments based on your available income. At the end of the repayment plan period, remaining balances on personal loans and other eligible debt are discharged.
Chapter 7 is limited by means testing and you will need to ensure that you qualify and this is the right choice if you want to have your personal loan debt discharged immediately. Otherwise, your balance can still come down significantly in a Chapter 13 filing.
Ronald D. Weiss, PC can help you to choose which chapter of bankruptcy to file under and can guide you through the filing process. Our attorneys will also help you to understand the impact of Nassau County bankruptcy on personal loans. Call today to speak with a member of our legal team and to learn more.