There are two types of bankruptcy that individuals can use to address old personal loans: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is a type of bankruptcy that is available to individuals, as well as some small businesses. It is often referred to as a “liquidation” bankruptcy, as it involves the sale of non-exempt assets to pay off debts. If you file for Chapter 7 bankruptcy in Montgomery, the court will appoint a bankruptcy trustee to oversee your case. The trustee will review your assets and debts and will sell any non-exempt assets to pay off your creditors.
One of the benefits of Chapter 7 bankruptcy is that it can provide a fresh start for individuals who are struggling with overwhelming debt. If you qualify for Chapter 7 bankruptcy, you may be able to discharge some or all of your old personal loans. However, there are some limitations on which personal loans can be discharged through Chapter 7 bankruptcy. Specifically, the following personal loans may be dischargeable through Chapter 7 bankruptcy:
- Personal loans that are unsecured. Personal loans that are not tied to any specific property, such as credit card debts or unsecured personal loans, are typically dischargeable through Chapter 7 bankruptcy.
- Personal loans that are not dischargeable under other bankruptcy provisions. There are certain types of personal loans that may not be dischargeable through Chapter 7 bankruptcy, such as student loans or debts incurred due to fraud or malicious intent.
It is important to note that if you have listed household items as collateral for a personal loan, the lender may be able to seize those items if you default on the loan. However, if you file for Chapter 7 bankruptcy in Troy, or anywhere else in the Montgomery area, then the automatic stay that goes into effect will prevent the lender from taking any collection actions against you, including seizing your household items.
Chapter 13 bankruptcy is another type of bankruptcy that is available to individuals. It is often referred to as a “reorganization” bankruptcy, as it involves the reorganization of debts into a repayment plan. When you hire a bankruptcy attorney in Prattville, or anywhere else in Alabama, then they will explain the process to you so you understand it completely.
Chapter 13 bankruptcy can potentially help with old personal loans by allowing you to include them in your repayment plan. This can provide a way to catch up on missed payments and avoid collection actions from your lenders.
It is important to note that not all old personal loans will be eligible for treatment under a Chapter 13 bankruptcy repayment plan. In order to be eligible, the personal loans must meet the following criteria:
- The personal loans must be unsecured debts. Personal loans that are not tied to any specific property, such as credit card debts or unsecured personal loans, are typically eligible for treatment under a Chapter 13 repayment plan.
- The personal loans must not have been incurred due to fraud or malicious intent. Personal loans that were incurred due to fraud or malicious intent may not be eligible for treatment under a Chapter 13 repayment plan.
While bankruptcy can potentially provide some relief for old personal loans, it is important to keep in mind that it is not a solution for everyone. Here are a few other considerations to keep in mind if you are considering using bankruptcy to address old personal loans. Not all personal loans are dischargeable in bankruptcy. There are restrictions on which personal loans can be dismissed in bankruptcy, as was previously mentioned. Bankruptcy might not be able to help you if your personal loans are not exempt from repayment.
Both Chapter 7 and Chapter 13 bankruptcy can potentially help with old personal loans, although there are limitations on which personal loans can be discharged or treated under a repayment plan. If you are considering using bankruptcy to address old personal loans, it is a good idea to consult with a Millbrook bankruptcy attorney to determine which type of bankruptcy is right for you and to understand the potential benefits and drawbacks of the bankruptcy process.
Attorney Steven A. Harris regularly blogs in the areas of family law, bankruptcy, probate, and real estate closings on this website. Mr. Harris tries to provide informative information to the public in easily digestible formats. Hopefully you enjoyed this article and feel free to supply feedback. We appreciate our readers & love to hear from you!