What happens to my loan if I declare bankruptcy?

Declaring bankruptcy is a significant financial decision that can have serious implications for your loans and overall financial situation. When an individual files for bankruptcy, the type of bankruptcy filed—either Chapter 7 or Chapter 13—will largely determine how loans, including personal loans, are treated. In a Chapter 7 bankruptcy, most unsecured debts, including personal loans, may be discharged. This means that individuals might not be legally obligated to pay back these loans after the bankruptcy process is completed. However, this does not apply to all types of debt. Certain loans, such as those backed by collateral or secured loans, may not be discharged and could still be subject to repayment. On the other hand, in a Chapter 13 bankruptcy, individuals create a repayment plan to pay back all or a portion of their debts over a specified period, typically three to five years. This method allows borrowers to keep their assets, while still managing their debts according to a court-approved plan. Secured loans will often need to be paid as part of this repayment structure to avoid losing any collateral. It is also essential to note that declaring bankruptcy can significantly impact credit scores and can remain on a credit report for several years, affecting future borrowing ability. Therefore, it is essential to consider all options and potential long-term effects of bankruptcy on personal financial health. For specific inquiries about personal loans and bankruptcy, individuals should check the latest resources available on the Avant Credit Corporation website for guidance and updates.