Can personal loans be claimed in chapter 7?

Personal Bankruptcy provides people, called debtors, with two options to get deal with their debts. Chapter 13 is one option. It allows debtors to repay creditors over an approximately three year period through a repayment plan. Typically, chapter 13 is for people with unsecured and secured debts. However, for people who are unsecured debts such as personal loans, they can use chapter 7. This bankruptcy chapter is for debts with unsecured debts such as medical bills, unpaid credit card bills and personal loans. Generally, personal loans include debts such as payday loans and loans provided by individuals such as family and friends.

Chapter 7 provides debtors with financial relief because it discharges, or legally wipes out, unsecured debts. This means that debtors who include personal loans in their chapter 7 bankruptcy won’t have to repay creditors who loaned them the monies. Thus, usually in four to six months all debts in the chapter 7 bankruptcy are discharged.

To qualify for chapter 7, debtors must pass a means test. This formula makes sure that debtors don’t have enough monthly income to pay creditors back. If they do, then they will qualify for chapter 13. In other words, they will have to pay back the personal loans.

Personal bankruptcy is tricky and requires debtors to follow many rules such as eligibility requirements like the means test. Thus, debtors should seek legal advice about personal loans and qualifying for chapter 7 bankruptcy.