Can personal loans be claimed in a chapter 7 bankruptcy?

Personal loans are loans that you take from a bank, credit union or other lender. Personal loans are not secure, which means theres no collateral like a house or a car that you pledge to the lender if you do not pay. Since there is no collateral and since personal loans are just like credit cards in many ways, personal loans can and often are included in a chapter 7 bankruptcy. 

There are, however, a few things that can't be included in a chapter 7. Student loans are one prime example of loans that can't be included. Although they are unsecured debt, like personal loans, special protections are afforded to student loans under the law by the government. Child support payments and most back taxes owed also can't be discharged in most bankruptcies.

So, what will happen to your personal loans and other eligible debt during a chapter 7?

• Your creditors will be paid some money out of the required sale of your possessions and out of the bankruptcy estate. Most of your things will be sold to make sure the creditors get something. This includes personal property, up to and including jewelry and cars you own. There are usually exemptions in place for a set amount of personal property (usually a few thousand dollars worth) as well as for some of the equity in your home, but anything that doesn't fall into one of the exemptions will be sold.
• Once the creditors are paid from the sale of your stuff, the remaining balance is discharged. This means that the creditors who you owed money to on your personal loans will never ever be able to collect on that money owed to them

To get help filing a chapter 7 and understanding how chapter 7 will impact your assets and the debt you owe, you should strongly considers speaking with an experienced bankruptcy lawyer.