Filing for Chapter 7 bankruptcy can offer significant relief to individuals overwhelmed by debt. However, if you’re considering taking this step, you should first discuss your situation with an experienced bankruptcy lawyer. There are numerous different types of debts, some of which can be discharged in a Chapter 7 proceeding, and others which cannot. Before you decide on a course of action, it’s best to have a full understanding as to how your specific obligations will be treated.
Questions frequently arise about the disposition of debts related to personal loans in a Chapter 7 bankruptcy. Fortunately for people who are saddled by these types of obligations, personal loans are considered unsecured debts that typically can be discharged. If you borrowed money from a friend, family member, employer or someone else, you should be able to eliminate what you owe once the Chapter 7 process is complete.
Other common examples of dischargeable unsecured debts include credit-card balances, payday-loan obligations and medical bills. These are distinguished from secured debts, such as mortgages and car loans, where a piece of property serves as collateral and is subject to foreclosure or repossession.
To qualify for Chapter 7 bankruptcy, you must pass the means test, which evaluates your income compared to the median for the State of Georgia. If your income is too high, you may be required to file under Chapter 13 instead. Additionally, the court will look at your financial history to ensure you are filing in good faith. Any fraudulent activity, such as taking out large personal loans right before filing for bankruptcy, could disqualify you from discharging the debt.
While most personal loans can be discharged in Chapter 7 bankruptcy, there are some exceptions. Loans obtained through fraudulent means, such as dishonesty on a loan application, will not be discharged. Additionally, personal loans co-signed by another individual may still affect the co-signer, as the co-signer would still be responsible for repaying the loan.
Discharging personal loans in a Chapter 7 bankruptcy can provide significant relief for those struggling with overwhelming debt. However, filing without the guidance of a seasoned attorney could lead to avoidable mistakes and continued frustration. At Jeff Field & Associates, we give Georgia residents personalized counsel so they can make smart choices about relieving the burden associated with personal loan obligations and other kinds of debts. For a consultation at one of our offices located in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Scottdale, please call 404-381-1278 or contact us online.