Someone going through
Chapter 7 bankruptcy, will attempt to discharge as many of their debts as possible. Debts that
can be dropped and disappear as if they were never there are known as
unsecured debts. Once bankruptcy is finalized, creditors and lenders who
once controlled those unsecured debts can do nothing to try to collect
on them, other than twiddle their thumbs and revise their lending strategies
in the future to try to avoid this situation again.
If you have loaned a friend or family member a couple thousand dollars
as a personal loan and now that person is filing for bankruptcy, here’s
some less-than-ideal news for you: personal loans are unsecured debts.
Even though you might have thought that you were just creating an unofficial
IOU between yourself and your friend, they have the opportunity to include
your personal loan in their bankruptcy filing and have the court dismiss
it with other unsecured portions of their debt, such as medical bills
and credit card debt. If the process does not put a strain on your friendship,
it will certainly put a strain on your wallet.
Are There Alternatives for Personal Lenders?
There is rarely ever
one set path in legal matters, especially when it comes to bankruptcy and
Consumer collections law will allow you to ask the bankruptcy court to secure your debt, or not
discharge it immediately, so long as the bankruptcy has not been finalized.
You must do this with a professional collections attorney, though, for
taking the wrong step in pursuit of an owed debt could land you in serious
There is also the possibility that your friend is not filing for Chapter 7 but
Chapter 13. In this case, not many unsecured debts will be discharged. Instead, the
terms and conditions are renegotiated to make payments easier, and possibly
lessened overall. You’ll want to get your foot in the door and work
with your collections lawyer to see if the court will order that your
personal loan get included in the restructuring. Consider this: getting
some of your personal loan back is better than getting
none of it.
The common trend in personal loan collections is retaining a professional’s
assistance. At The Pritchard Law Firm, our Fort Worth consumer collections
attorney can help you navigate this delicate process. Our goal is to get
you the money you deserve and to do so with causes as little stress and
disagreements as possible between you and the person to whom you lent it. Call
today for a
complimentary case evaluation.