A variety of factors determine if you’ll be able to discharge all of certain personal loans, including whether the loan is secured or unsecured and whether you file via Chapter 7 or Chapter 13 bankruptcy. 

If you’re considering filing for bankruptcy, you need to know what personal loans you can discharge and which filing method suits your financial situation. Your bankruptcy case will go much more smoothly if you have a bankruptcy attorney who is familiar with the bankruptcy code on your side.

Types of Personal Loans

According to Business Insider, a personal loan allows you to borrow a specific amount of money via digital or cash deposit for different purposes. The repayment periods are between 1-7 years, although a payday loan may have just a term as short as a few business days or as long as a few weeks.

Types of personal loans include:

• Installment Plan
• Payday
• Peer-to-Peer Lending
• Cosigner/Guarantor
• Debt Consolidation
• Variable Rate
• Fixed Rate

During your bankruptcy proceeding, at least a portion of these loans will be discharged, whether you borrowed from brick-and-mortar or online lenders. If you are filing for Chapter 13, personal loans will be combined with any additional debt and used to calculate your monthly payments.

What’s the Difference Between Secured and Unsecured Personal Loans?

Before choosing your first personal loan, you need to understand the difference between secured and unsecured loans.

Unsecured loans don’t have collateral. If you fail to repay an unsecured personal loan, the lender cannot repossess your assets. Common unsecured loans include:

• Loans from banks or credit unions with no collateral
• Signature & payday loans
• Personal loans from lenders that you know personally

In addition to unsecured personal loans, there are other types of unsecured debts, such as:

• Medical bills
• Repossession deficiency claims
• Old lease balances
• Credit card debt
• Unpaid utility bills
• Some attorney fees
• Dishonored checks

Secured loans involve collateral that the lender can repossess if the borrower fails to make payments.  

Discharging Personal Loans Through Chapter 7

Whether you should discharge a personal loan in Chapter 7 will depend on whether the loan is secured or unsecured.

You can discharge an unsecured loan whether it’s current, delinquent, or in default, even if the original lender sold it to a collection agency or debt buyer.  

Discharging Personal Loans Through Chapter 13

Like with Chapter 7, you can discharge an unsecured personal loan after bankruptcy by filing Chapter 13 and completing a Chapter 13 plan. The Chapter 13 plan reorganizes your various debts, including personal loans, into a monthly payment plan that lasts three to five years after your filing date. 

Unlike Chapter 7, you’ll pay part of the money you owe on unsecured debts, but most Chapter 13 payment plans reduce the total amount you’ll need to pay.

People who are behind on secured personal loans can use Chapter 13 to return to good standing. People often file Chapter 13 to catch up on house or vehicle payments.

Getting a Loan After Filing for Bankruptcy

Bankruptcies can impact your ability to qualify for a new personal loan. A personal finance writer who works with bankruptcies for personal loans is available, but your eligibility will depend on when you filed, how your credit score and history were impacted, your income, and whether the new loan is secured or unsecured.   

Chapter 7 will remain on credit reports for ten years and Chapter 13 bankruptcies remain for seven years. Even though it can be more challenging to get a personal loan after bankruptcy is listed on your credit history, you need to apply for loans from lenders who check your credit. No-credit-check lending, such as payday and title loans, often comes with unreasonable fees and annual percentage rates (APR). 

When seeking a new personal loan after bankruptcy, use legitimate lenders, such as major financial institutions, credit unions, or through Credit Karma.

FAQs About Personal Loans and Bankruptcies

Here are some commonly asked questions from our clients as they are preparing for bankruptcy court on their way to becoming debt-free.

Which personal loans can be cleared through Chapter 7?

Also called a liquidation bankruptcy, Chapter 7 allows you to discharge most unsecured personal loans, such as credit cards, medical bills, payday loans, personal signature loans, and cash advances. Any unsecured loans you take out after filing can be discharged if you file again.

How will my personal loans be treated under a Chapter 13 bankruptcy filing?

Chapter 13 offers a 3-5-year plan to pay back a portion of your debts via monthly on-time payments. This allows you to keep assets like your home or car while repaying some debt. Unsecured personal loans can be consolidated into your repayment plan at a reduced amount.

What are some other differences between filing Chapter 7 vs Chapter 13 bankruptcies?

Chapter 7 wipes eligible debts completely while Chapter 13 restructures debts into a structured repayment. Chapter 7 has no asset exemptions while Chapter 13 allows exemptions. Chapter 7 stays on your credit report for ten years vs seven years for Chapter 13.

How soon after discharge can I apply for a new personal loan?

You can apply for a new personal loan immediately after your discharge. However, it is difficult to qualify that soon. Experienced lawyers recommend waiting 12-24 months to improve the chances of getting a loan agreement with a lender, whether that is a bank, credit union, credit card company, or any other financial institution.

What are some tips for improving my chances of getting approved for a personal loan after bankruptcy?

Tips include waiting at least 12-24 months after discharge to fill out a new personal loan application, maintaining low credit card balances, paying off as much debt as possible every month, limiting your credit usage, making all payments on time, keeping income stable, having a co-signer, and applying with lenders experienced in post-bankruptcy loans. These actions help filers rebuild their credit scores to have good credit again.

Will I qualify for a secured personal loan more easily than an unsecured loan?

Yes, if you need to get a personal loan after going through bankruptcy, secured loans that require collateral like a car title loan or home equity loan are easier to qualify for post-bankruptcy. Expect higher interest rates as many lenders view you as a risky borrower. Credit reports tell lenders a lot about you, so focus on building good credit.

How does the type of bankruptcy I file impact the wait time to get a new personal loan?

Those who file Chapter 13 typically have an easier time qualifying for new credit because they demonstrate an ability to repay through their loan proceeds. Chapter 7 filers may need to wait longer before their approval odds increase.

Are payday loans or title loans a good idea after bankruptcy? What are the risks?

Payday and title loans are risky because they always charge a high interest rate. For any loan amount of money, their rates can exceed 400%. It’s easy to get trapped in a cycle of renewals while trying to pay for other bills. Nonpayment of title loans can lead to vehicle repossession. Personal loan bankruptcy discharge plans are one of the ways that people escape these predatory cycles.

How can I rebuild my credit to improve my chances of loan approval after bankruptcy?

Getting a secured credit card and making monthly payments can help rebuild your credit. If you need to get a personal loan after bankruptcy, monitor your credit report and dispute any errors. Avoid falling behind on any payment plan, as failing to repay can damage your credit even further. So can a late payment.

You may be able to become an authorized user on someone else’s account, such as a trusted family member. Maintain low balances on credit cards. Making payments on time helps, too!

What documents or information do lenders need when applying for a loan after bankruptcy?

To borrow money, you’ll need ID, such as a driver’s license, proof of income (pay stubs), proof of address, bankruptcy discharge paperwork, a list of assets, bank account info, bank statements, and minimum credit score requirements that are set by the lender. Some lenders may also have additional eligibility requirements.

Can I discharge tax debt through bankruptcy?

Most tax debt cannot be discharged through bankruptcy. However, income tax debts from returns filed more than 3 years ago can potentially be discharged in Chapter 7. Certain other taxes like payroll taxes usually cannot be discharged. Consulting an attorney is recommended for discharging taxes.

Contact Indiana Bankruptcy Attorneys

Don’t go it alone when you’re ready to file — contact bankruptcy lawyers who can assist you with the process of addressing personal loans from before and after bankruptcy and protect you from creditor harassment. 

Looking for bankruptcy attorneys in Indiana? Call the legal associates at Sawin & Shea, LLC at 317-759-1483, or you can schedule a FREE consultation online.

The post What Happens After a Personal Loan Bankruptcy Discharge? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

In this blog, we’ll share the details regarding this exemption increase, the different exemption categories, and how these exemptions impact Chapter 7 and Chapter 13 bankruptcy.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions refer to tangible or intangible assets protected from seizure when you file for bankruptcy.

If you’re filing for Chapter 7 bankruptcy, you can retain exempt assets and protect them from seizure but only up to a particular point. The court-appointed bankruptcy trustee can confiscate any non-exempt assets to liquidate in order to pay back some of your debts. That said, the majority of those who file for Chapter 7 bankruptcy are able to keep all of their possessions.   

In Chapter 13 bankruptcy, you pool your debts into a three-to-five-year repayment plan, and you get to keep your property. These exemptions still apply because they decrease the amount that you’ll need to pay back to creditors with your repayment plan.

Why Did Bankruptcy Exemptions Increase in Indiana?

Last year, the Indiana Department of Financial Institutions (IDFI) increased the bankruptcy exemption amounts. This is standard procedure, as the IDFI updates the allowable exemption amount every six years to reflect inflation.

How the IDFI calculates this increase is through the United States Department of Labor’s Consumer Price Index for All Urban Consumers. The economic disruption caused by the COVID-19 pandemic and other factors surged inflation rates, and the IDFI adjusted bankruptcy exemptions to keep pace with new rates. These exemptions went into effect on March 1, 2022.

What Assets Are Exempt When Filing for Bankruptcy?

Before we dive into the new exemption amounts, it’s worth noting these different exemption types. The two main exemptions you can expect when filing for bankruptcy are the homestead exemption and wildcard exemption.

The homestead exemption allows for debtors to protect their home’s equity, and this applies to either residential property or personal property that’s used as a residence, such as a trailer. It’s important to note that the homestead exemption will not protect your equity in a secondary residential property, such as a rental or lake house.

The personal property exemption protects a certain amount of tangible and.The tangible assets could include equity in secondary residential property, a vehicle, household items, furniture, clothing, jewelry, or any other personal property.

The intangible assets exemption looks at cash or cash equivalents and include money in a debtor’s bank account, inheritance, tax refunds, claims against others, or any other non-physical asset.

2023 Bankruptcy Exemptions Indiana

The new bankruptcy exemption amounts in Indiana are:

• Homestead Exemption: The amount of protected equity increased from $19,300 to $22,750.

• Wildcard Tangible Asset Exemption:  You can exempt tangible property that’s worth up to $12,100, an increase from $10,250.

• Wildcard Intangible Asset Exemption: You can now protect up to $450 in intangible personal property while the previous amount was only $400.

2023 Married Filing Jointly Bankruptcy Exemptions

You should note that the exemption amounts above apply to individual debtors. Those married and filing jointly can exempt twice the amount, meaning:

• Homestead Exemption: $45,500

• Wildcard Tangible Asset Exemption: $24,200

• Wildcard Intangible Asset Exemption: $900

Are There Any Other Bankruptcy Exemptions in Indiana?

In addition to these new exemption amounts, you may have other exemptions, including different types of benefits, accounts, and personal property.

• Personal Property: Includes health aids, spendthrift trusts, tuition programs, education savings accounts, and military uniforms and equipment.

• Benefits: Indiana protects retirement benefits, which can include pensions, IRA accounts, retirement funds, and other types of retirement benefit plans.

• Insurance: Insurance policies and benefits are exempt, including fraternal society benefits and life insurance policies in which the debtor’s children, spouse, or dependent relatives are beneficiaries.

• Miscellaneous: Other protected assets include unemployment benefits, some partnership properties, workers’ compensation, and a percentage of unpaid wages.

Contact an Indianapolis Bankruptcy Lawyer

Facing bankruptcy is a daunting prospect, and the process can be incredibly confusing. To ensure that you file correctly and receive the maximum exemptions, consider contacting a bankruptcy attorney who will assist you through the process. 

If you’re considering filing for bankruptcy in Indianapolis or surrounding counties, contact the lawyers at Sawin & Shea, LLC. We’ll untangle the complexities of filing for bankruptcy and will help you get your finances back on track so that you can eventually live debt free. Plus, we’ll help you deal with conflict that arises from your financial situation, such as creditor harassment.

You can schedule a free consultation today by calling 317-759-1483 or by contacting us online here.

The post Indiana Increased Bankruptcy Exemptions in 2022. Here’s How it Affects You. appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a form of personal bankruptcy that liquidates filers’ assets to discharge qualifying unsecured debts. Unsecured debts are not backed by collateral, such as car payments and home mortgages. Although the idea of liquidating your assets may sound stressful and undesirable, most of those who declare Chapter 7 can retain all of their possessions after filing.

The debts that you’ll be able to discharge with Chapter 7 bankruptcy include:

• Medical debts
• Credit card debts
• Majority of auto accident claims
• Personal loans
• Business debts
• Past-due rent debts
• Past-due utility debts
• Majority of attorney fees
• Majority of civil court judgments
• Old tax penalties and some unpaid taxes
• Repossession deficiency charges
• Collection debts
• Benefit overpayments

Although those who declare Chapter 7 can discharge many unsecured debts, they cannot discharge:

• Some types of taxes
• Debts owed to a child or former spouse that occurred because of a divorce or legal separation, including alimony and child support
• Government agency fines and penalties
• Most student loans
• Attorney fees in child custody cases
• Court penalties and fines
• Personal injury damages owed to a victim because the plaintiff drove while intoxicated
• Money owed to certain types of cooperative housing organizations
• Money owed for some kinds of tax-advantaged retirement plans

Who Can Declare Chapter 7 Bankruptcy?

Whether or not you qualify for Chapter 7 bankruptcy will depend on your income. You determine your eligibility by considering your monthly income relative to the median income within your state. You calculate your monthly income by averaging your earnings in the last six months.

If you’re an individual considering filing, you’ll compare your monthly income to other individuals. But if you have a family, you’ll compare your income to other families of the same size. You qualify for Chapter 7 bankruptcy if your monthly average is equal to or less than the median in your state.

If your average monthly income is more than your state’s median, you’ll need to pass what’s known as a “means test.” This test determines whether you have disposable income at the end of each month to pay off your unsecured debts over five years. Suppose you have enough money left over each month after necessary expenses and debt payments. In that case, the bankruptcy court will recommend that you declare Chapter 13 bankruptcy, which consolidates your debts into a three-to-five-year repayment plan.

There are also other disqualifying factors for Chapter 7 bankruptcy, including:

• You’ve already received a Chapter 7 bankruptcy discharge in the last eight years
• You’ve declared Chapter 13 bankruptcy in the previous six years

What Do You Need to File Chapter 7 Bankruptcy?

The first step you need to take to declare Chapter 7 bankruptcy is to schedule a consultation with an experienced bankruptcy attorney. They will work with you to gather your financial records, including all of your debts, expenses, assets, and income streams. You’ll also need to supply the bankruptcy court with a list of creditors, an income statement, and copies of your tax records.

After gathering all necessary documents, you must undergo an approved credit counseling session within 180 days of filing. You’ll also need to supply the court with a certificate indicating  that you’ve undergone credit counseling.

Finally, you’ll file a petition for Chapter 7 bankruptcy. You’re not required to have legal counsel, but representing yourself through the bankruptcy process can lead to costly, irreversible mistakes. It’s recommended that you hire a Chapter 7 bankruptcy attorney who can represent you and guide you through the process before filing.

What Happens After You File Chapter 7 Bankruptcy?

Filing Chapter 7 bankruptcy provides you with an automatic stay that prohibits creditors from being able to take any action to collect a debt against you, such as repossessions, wage garnishment, and legal action. Additionally, your creditors will not be allowed to contact you.

After you file, the bankruptcy court will appoint a trustee who’s in charge of reviewing your case and for non-protected assets. Your attorney will explain what you are allowed to keep through the Chapter 7 process and what might be at risk. Once again, most of those filing for Chapter 7 bankruptcy do not lose their any of their possessions. Additionally, your bankruptcy trustee will hold what is called a meeting of creditors, and you are required to attend this meeting. Creditors are allowed to attend, but they rarely do.

The Chapter 7 bankruptcy process usually takes three to four months; once you complete the process, you will discharge your qualifying debts.

Filing Bankruptcy Chapter 7 in Indiana? Contact Sawin & Shea Bankruptcy Attorneys

If you plan on filing for Chapter 7 bankruptcy, you need experienced Indiana bankruptcy attorneys who can represent you and ensure you’re on the right track to becoming debt free. For experienced bankruptcy support you can count on, contact the attorneys at Sawin & Shea, LLC at 317-759-1483, or contact us online here for a FREE case consultation.

The post Who Can Declare Chapter 7 Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.