Personal Loans Eligible to Be Discharged in Bankruptcy
One of the most important elements debtors should review when considering
bankruptcy
is how personal debt is handled by the court. When you file, you are required
to list outstanding debt including loans owed to friends or family. Depending
on the chapter you file they are handled differently. For the most part,
these types of personal loans may be eligible for discharge or inclusion
of a repayment plan schedule.
Family Loans and Bankruptcy
Personal loans owed to family or friends are handled in the same fashion
as other loans that are commonly included in a filing. When you are considering
bankruptcy you should avoid making payments on such loans. Meaning, if
you decide to pay your family member or friend what was owed before filing,
this action could affect the outcome of your case. The court may view
such action as showing favoritism to certain creditors, when the court
treats all debts equally and fairly. Plus, doing this may be considered
a form of bankruptcy fraud you would want to avoid.
Establish a Reaffirmation Agreement
Sometimes owing money to someone you know such as family or friends can
cause conflict. You may want to try and establish a reaffirmation agreement
that includes talking to them about a payment arrangement. On the other
hand, bankruptcy offers additional options.
Chapter 7 bankruptcy
may discharge or wipe out the debt (if unsecured), if a sale of property
or personal asset doesn’t offer full or partial payment.
Chapter 13 bankruptcy
may include the debt in the repayment plan, with part, if not all of the
debt being repaid based on disposable income and secured debt obligations.
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