If you are in a position where you are considering bankruptcy, you are already in a bad spot. Filing bankruptcy should be a last resort. You should only consider this when you are completely out of options. You should think of it as the end of the road, or rock bottom. Once you are there, you have to work really hard to get yourself out of it.
Bankruptcy of today is different from in the past. Today not all debts are written off under the bankruptcy umbrella. However, even under the new rules, bankruptcy include a personal loan as a debt that is discharged. Keep reading to find out more information on bankruptcy and how to avoid it.
Let’s Talk About Debt
If you are thinking about bankruptcy, you may not fully understand how debt works. To make good decisions, you need to know all the information. I am going to share some basic information about debt. You may already know this stuff, but hang in there with me. Debt is not always a bad thing.
It must be used properly and in moderation or it becomes a monkey on your back. Debt is the way you make big purchases, like a house, or car. We cannot afford to pay for a house in cash, so we take on debt to buy a house. This means, a lender gives you the money for the house and you sort of become co-owners of it. They are the strong silent type, so as long as you pay them what you promised each month, they leave you alone. However, when you do not pay as promised, they can take back the house.
— Loanry.com | Loan Shop ? (@LoanryStore) July 31, 2019
When you have too much debt, you put yourself in a position where you owe more money than you earn. When this happens, you can no longer pay the bills and you miss payments. The debt piles up higher, your credit score drops and the collection calls start. I got a little ahead of myself there.
You take on debt to borrow money to pay for things you cannot afford outright. When you do that too often, you fall into a cycle of not being able to pay any of your bills. You should work hard to prevent this. If you know how much debt you can afford, you can prevent yourself from drowning in debt.
What Is Bankruptcy?
Nolo, an internet site for legal information and assistance, states bankruptcy is a way to get a “clean financial plate as a fresh start”. Most individuals would file Chapter 7 bankruptcy. This allows the debtor, the person filing bankruptcy, to have certain debts wiped away. Filing bankruptcy is not as easy as it once was. Not everyone qualifies for bankruptcy and not all debts are removed.
The debtor is still responsible for student loan debt, income taxes, and child or domestic support. Before considering filing for bankruptcy, make sure you understand all of your debt to ensure it qualifies. Keep in mind that filing bankruptcy has a negative impact on your credit report and may stay there for seven years.
Are Personal Loans Discharged During Bankruptcy?
Yes, personal loans, including loans from family and friends, are discharged as a result of bankruptcy. During bankruptcy legal obligations are discharged, which means that you are no longer obligated to pay those debts. Bankruptcy include a personal loan, credit cards, and medical bills. This means these debts go away and the debtor does not have to consolidate them into one monthly payment. There are a few catches. The debtor must agree to sell some of your property to pay back the debt. Some property is protected under state laws.
Here is a short list of Debts Included in Bankruptcy including Personal Loans
- Credit cards
- Unsecured Loans like Personal loans
- Car repossessions or Title Loans
- Bills for Medical Expenses
- Legal problems and judgments
- Outstanding rent payment
- Utility Bills
Please note that you should also talk to a bankruptcy attorney to discuss other debts that may fall into the above list and other implications of a bankruptcy.
Is Filing Bankruptcy A Good Idea?
There is not one good answer that works for everyone. It depends on your situation. Bankruptcy should always be a last resort when you have no other options.
Smart Money Tips!
You need to consider if you are willing to have something on your credit report for seven years that will seriously impact everything you want to do. Also consider if you are willing to sell all your assets, except the ones that you really need. You may think, “well, I don’t have any real assets to lose.” That may be true.
Perhaps your credit score is already in a bad place and it cannot go down too much further. When you are faced with no other options and you feel yourself drowning in debt, possibly this is the right move. You know bankruptcy include a personal loan and potentially other debts, so it may be right for you.
Do I Have Other Options?
There are definitely other options you should consider before bankruptcy. One of the first things you should consider is consolidating your debt to a lower interest. When you do this, you are getting personal loans for bad credit to pay off all of your debts. This way you have only one payment per month. You pay off all of your single debts and focus on just this one.
It may not impact your credit score at all, or impact it minimally. You may face higher interest rates, but it might be worth it to you in the long run. Getting personal cash loans may be a viable option for you. Perhaps you can borrow money from a family member, or friend. You may want to consider borrowing a loan from your own 401k. These all may be better alternatives to considering bankruptcy include a personal loan.
Can I Negotiate To Lower My Debt?
If a personal loan is not for you or you cannot get personal loan online, you may want to consider negotiating your bills instead. You probably have a decent amount of bills each month. How do you know if you are getting the best deal? Research, my friend, research. You have to advocate for yourself. Let’s face it, businesses are out to make money. After all, that is why they are in business.
They are not going to determine if you can get a better deal and save money. You have to do that for yourself. Once you do all the research to see if there are better plans or rates available, you have to call each company, or credit card to negotiate a better deal. This takes time, but it can save you hundreds of dollars per month. In the end, it may not save you from facing a bankruptcy include a personal loan and other debts, but it just might.
The last thing lenders really want is for you to default on what you owe them. They do not even want you to file for bankruptcy because they probably will not get any money that way. If you are honest and up front with them, they may be willing to negotiate with you to create payments you can afford, so they can get most of their money.
— Loanry.com | Loan Shop ? (@LoanryStore) July 30, 2019
If I File Bankruptcy, Then What?
You decide to file bankruptcy, so now what? There are some things that you need to know that you probably do not. Bankruptcy is going to cost you. You already know it is going to take time and it is going to be a hit to your credit. You also know that you may have to give up some assets. It is also going to cost you money. You need a lawyer to handle the process. The more complex your situation is, the more you have to pay the lawyer.
On top of the lawyer, you will have court costs and other fees. Funny isn’t it? You are working hard to get out of debt by paying out more money that you have already said you do not have. If you decide to go through the process, you should constantly monitor your credit report. Not only will it be a black mark for seven to ten years, but some of the information may be wrong. If it is wrong, you need to dispute it to have it removed. Remember, while bankruptcy include a personal loan, it may not include all of your debts.
What Happens To My Credit?
You know that filing bankruptcy impacts your credit, but let’s talk about just how much. Your credit score can decrease by about 160 to 220 points. That is significant. If you have good credit before bankruptcy, it will be poor by the end of it all. That type of decrease makes it really challenging to obtain new credit, such as a credit card, car or house. At the time when you are considering bankruptcy, you may think that you need to take care of the immediate problem.
You may not think of the long range implications. But, ten years is a long time and so many things can change. Be aware that making a bankruptcy decision impacts every decision you make for the next ten years. It may seem like the answer now, especially when bankruptcy include a personal loan and most other debts. However, it may not always be the best answer.
Can I Repair My Credit?
I told you the bad news, so now I want to brighten things up a bit. All is not lost as you can repair your credit. It takes hard consistent work, but it is possible. When you plan on a bankruptcy include a personal loan and other debts, you should already start thinking about fixing your credit. It is an uphill battle, for sure. However, many people have faced bankruptcy and were able to turn it around. You can, too. You just have to be focused on that goal.
Start by having a positive payment history. Any bills that you keep after bankruptcy, you should pay them in full and on time. You could get a credit card, even if it has a low limit, and begin to build some positive credit again. When you use the credit card, plan to pay it off each month in an effort to build positive credit again.
What Kind Of Loans Can I Get After Bankruptcy?
When you are working to build credit after bankruptcy, you should be careful. You do not want to end up in the same place you were before filing bankruptcy. You also do not want to take out any kind of loan that puts unreasonable repayment expectations on you.
Loans such as paydays loans may not be in your best interest. Payday loans must be paid back within two weeks. You must pay them in full. You may want to consider short term loans that you are able to repay. Typically, these are loans for small amounts and they must be paid back in a short time frame, such as a couple of weeks. Before you consider taking on this type of loan after bankruptcy, be sure you can repay it on time. Keep in mind the purpose is to repair your credit.
You can look for the best loan for you here, on Loanry. The best part of shopping online for a loan isn’t just that you don’t have to go anywhere, it’s also goes extremely quickly. You can get offers from lenders within next few minutes and see what your options are.
A Little Bit About Budgeting
It is never too late to learn how to budget your finances. The sooner you create a budget for yourself, the better able you are to control debt. If you do not control your debt, it will control you. There are some key points to remember when it comes to budgeting. First, you must know your income and all your expenses. You have to write it down. Do not guess because you will forget something. Then, you must organize it all and put it into categories. Then, you rank the importance of each expense. When taking these actions, you must be critical.
Let me give you an example:
Food is important and it should be ranked high. However, eating out is not important and should be ranked low. There are many more affordable ways to eat than eating out. When creating a budget for food, you should call it groceries. Then, you should consider the most affordable way to buy your groceries. This may seem like a tedious task, but once it is done, you will not have to recreate it all over again. You will most likely have to tweak it, but not redo it. In this technological world, there are many budget websites to help you.
Secured vs Unsecured Loans
When you are looking to use a loan to improve credit after bankruptcy include a personal loan and other debts, you may need to consider a secured loan. An unsecured personal loan is one that does not have any type of collateral attached to it. This is risky for the lender because if you default, they lender typically loses most of its money. A secured loan is one that has collateral attached to it. If you default on a secured loan, the lender can take your collateral as their own. This happens most often with cars and houses. You use the car or house as collateral and if you default, the lender takes them.
You could also consider having a co-signer on any type of loan for which you apply. A co-signer is agreeing that you will pay the loan. If you do not pay the loan, your co-signer must pay the loan for you. If neither of you pay the loan, it impacts credit for both of you. This also gives the bank more security that you will pay your loan on time.
That Budget Thing Again
It always comes back to your budget.It is important that you save money. I know it often seems impossible, but save a little bit of money with each paycheck. If you do not touch it, you will be surprised at how quickly it adds up. You can have that money for emergencies and protect yourself from considering bankruptcy include a personal loan. When you have some money saved in the bank, it can save you from a lot of stress. It is never too late to create a budget. Taking care of yourself includes securing your finances. You can take control of them today.
This posting has focused heavily on bankruptcy include a personal loan and other debts. It is not just about bankruptcy. It is also about securing your finances and preventing bankruptcy. No one makes that decision lightly. You should consider the short term and long term implications of filing bankruptcy. When you arm yourself with knowledge, you can save yourself a lot of headache.
Julia Peoples is a long-time business manager focused on providing decision making assistance to the public. She works with people at key points of their lives who are making important retirement and financial decisions. She has had many articles published that educate the public on sound financial decision making.
Julia writes for those who are working towards financial freedom or a better understanding of how finances work. She has shared her financial insights with individuals on a one on one basis for years.