For many facing financial hardships that they hope to manage with time, Chapter 13 bankruptcy tends to be the best option. However, when an emergency situation, life event, or change in the family size calls for the need for a personal loan, many may ask, “Can I get a personal loan while involved in a Chapter 13
bankruptcy restructuring?” The Jones Law Firm explains.
Can I get personal loans while involved in Chapter 13 bankruptcy?
The average repayment plan for Chapter 13 bankruptcy is three to five years. While many people try not to incur new debt while in the midst of bankruptcy, the reality is that within that time frame, life may call for different needs. Under certain circumstances, the court will approve personal loans for a new vehicle or some debts incurred due to medical needs. However, before you can secure such loans, you will need court approval. In order to do so, you will need to ask the trustee on your case and the court by completing the following:
- Financing statement of the loan’s terms including the length of the loan, interest rate, monthly payments, etc. even if the loan is from a friend, family member, or borrowed off an employee benefit.
- Complete paperwork with your trustee that will analyze the implications of taking on new debt in regards to current creditors.
- File the motion for court approval. You may also be asked to go to court for a short hearing.
- Upon approval, you will need to send a copy of the court order to your new lender.
Though the courts often look down on incurring new debt, it is possible in extreme cases. While securing personal loans while involved in Chapter 13 bankruptcy filing is one thing, knowing if your previously acquired personal loans will be included in your bankruptcy repayment plan is another.
Are personal loans included in Chapter 13 bankruptcy? What about Chapter 7?
In short, in some cases, personal loans may be discharged under bankruptcy. But it does greatly depend. In Chapter 7
bankruptcy filings, personal loans are often dischargeable unless they pertain to taxes or support payments
. Under Chapter 13 bankruptcy, any personal loans inquired will be factored into the repayment plan to be paid back in part or in full, depending on the situation. Whether you are involved in a Chapter 7 or Chapter 13 bankruptcy case, understanding where personal loans may factor in can be complex. But knowing you have a trusted Columbus, Ohio
attorney to help you navigate the bankruptcy process can make it so much easier.
The Jones Law Firm
If you have questions about a personal loan during the bankruptcy process, contact
Columbus, Ohio bankruptcy attorney Michael Ryan Jones today.