Can a Personal Loan Be Discharged in Bankruptcy?

When debt becomes overwhelming, bankruptcy may feel like the only option. Many borrowers wonder whether personal loans can be included and discharged as part of the bankruptcy process.

In most cases, personal loans can be discharged in bankruptcy—but the outcome depends on the type of bankruptcy filed and your specific circumstances. This guide explains how personal loans are treated in bankruptcy and what to expect.

What does it mean to discharge a debt?

Discharging a debt means you are no longer legally required to repay it. Once discharged, creditors cannot continue collection efforts on that debt.

Are personal loans dischargeable in bankruptcy?

Yes, most personal loans are unsecured debts and are generally dischargeable in bankruptcy, unlike certain obligations such as student loans or child support.

Chapter 7 bankruptcy and personal loans

Chapter 7 bankruptcy allows eligible borrowers to discharge qualifying unsecured debts, including personal loans, usually within a few months.

Some assets may be liquidated to repay creditors, depending on state exemption laws.

Chapter 13 bankruptcy and personal loans

Chapter 13 bankruptcy involves a court-approved repayment plan lasting three to five years. Personal loans may be partially repaid during the plan.

Any remaining eligible balance may be discharged at the end of the repayment period.

What types of personal loans may not be discharged?

Personal loans obtained through fraud or false pretenses may not be eligible for discharge if successfully challenged by the creditor.

How bankruptcy affects your credit

Bankruptcy has a significant negative impact on credit scores and can remain on your credit report for up to ten years, depending on the chapter filed.

Alternatives to bankruptcy for personal loans

• Loan settlement
• Hardship programs
• Debt consolidation
• Credit counseling

When bankruptcy may make sense

Bankruptcy may be appropriate if you have overwhelming unsecured debt and limited ability to repay, even with modified payment plans.

Risks and consequences of filing bankruptcy

Bankruptcy can affect future borrowing, housing, and employment opportunities. Legal and filing costs should also be considered.

How to decide if bankruptcy is right for you

Consulting a qualified bankruptcy attorney or credit counselor can help you understand your options and potential outcomes.

Frequently asked questions

Do personal loans survive bankruptcy?Most unsecured personal loans do not, unless excluded due to fraud.

Will bankruptcy stop collections?Yes. Filing triggers an automatic stay that halts collections.

Can I get a loan after bankruptcy?Yes, but interest rates may be higher initially.

This guide is part of our complete Personal Loans learning center, where you can explore related borrowing, repayment, and credit topics.