Yes, personal loans can be included in bankruptcy, and in most cases they are wiped out entirely. Because personal loans are almost always unsecured — the lender holds no collateral — federal bankruptcy law groups them with the category of debt most likely to be discharged. Whether you file Chapter 7 or Chapter 13 changes how fast that happens and whether you repay anything first, but the end result for a typical personal loan is the same: the balance is legally eliminated.
A handful of situations can block that outcome. Fraud on the loan application, luxury purchases or large cash advances taken shortly before filing, and failure to list the debt on your schedules can each keep a personal loan alive after your case closes.
Personal Loans in Chapter 7
Chapter 7 is the faster route. A court-appointed trustee reviews your assets, sells anything not protected by exemptions, and distributes the proceeds to creditors in a priority order set by federal law. General unsecured debts like personal loans sit near the bottom of that order.1Office of the Law Revision Counsel. 11 USC 507 – Priorities Most Chapter 7 cases are “no-asset” cases, which means the trustee finds nothing to sell and personal loan lenders receive nothing before the debt is discharged.
Discharge usually arrives about four months after you file.2United States Courts. Discharge in Bankruptcy – Bankruptcy Basics Once the court issues it, the discharge works as a permanent injunction: the lender cannot sue you, call you, or try to collect, and the ban follows the debt even if it has already been sold to a collection agency.3Office of the Law Revision Counsel. 11 U.S. Code 524 – Effect of Discharge From the moment you file, an automatic stay also stops lawsuits, wage garnishments, and collection calls while the case is pending.4Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay
Because the lender has no collateral to seize, your focus in Chapter 7 is protecting your own property, not surrendering anything to the personal loan company. State exemptions, and in some states the federal set, determine what you keep. If you use the federal exemptions, a wildcard provision shields up to $1,675 of any property plus up to $15,800 of unused homestead exemption — a combined cushion of as much as $17,475 you can apply to bank accounts, a vehicle, or other assets.5Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions
Not everyone qualifies for Chapter 7. A means test compares your household income over the previous six months to the median for your state and family size. Below the median, you qualify automatically; above it, a second calculation of disposable income over 60 months can push you into Chapter 13 instead. The U.S. Trustee Program publishes the median income figures used for cases filed on or after November 1, 2025.6U.S. Trustee Program/Dept. of Justice. Census Bureau Median Family Income By Family Size
Personal Loans in Chapter 13
Chapter 13 is for filers with regular income who propose a three-to-five-year repayment plan — three years if income is below the state median, up to five years if above.7United States Courts. Chapter 13 – Bankruptcy Basics Personal loans join the pool of general unsecured debts, which typically receive only a fraction of what is owed. How much depends on your disposable income after allowed living expenses.
Those expenses follow IRS National Standards for food, clothing, personal care, and other household costs. The current allowance is $839 per month for a single filer and $2,129 per month for a family of four.8Internal Revenue Service. National Standards: Food, Clothing and Other Items Whatever remains after expenses and priority obligations flows to unsecured creditors through the plan. When you finish the plan, any remaining personal loan balance is discharged.7United States Courts. Chapter 13 – Bankruptcy Basics
When a Personal Loan Survives Bankruptcy
Federal law carves out exceptions where a personal loan is not dischargeable. A lender who thinks one applies must file an adversary proceeding in the bankruptcy court within 60 days of the first meeting of creditors; miss that window, and the debt is discharged regardless.2United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
The exceptions that come up most often with personal loans:
- Fraud on the loan application. If you overstated your income or hid other debts to get approved, the lender can argue the loan was obtained by fraud and should survive the bankruptcy.
- Luxury purchases of more than $900 to a single creditor within 90 days before filing. These charges are presumed non-dischargeable.9Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
- Cash advances totaling more than $1,250 taken within 70 days before filing. These are also presumed non-dischargeable.9Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
The last two are rebuttable presumptions. You can present evidence that the spending was legitimate or that you intended to repay the money when you borrowed it, but the burden is on you.
Loans From Family and Payments Before Filing
A loan from a parent, sibling, or friend is still a debt, and it has to appear on your bankruptcy schedules alongside every other personal loan. Leaving a relative off the list does not protect them; it looks like concealment and can jeopardize the entire case.
Paying a family member back shortly before you file causes a different problem. The trustee can reverse the payment as a preferential transfer and redistribute the money to all creditors. For ordinary creditors the lookback is 90 days, but for insiders — including family — it runs a full year. A well-meaning repayment to a parent can be clawed back into the bankruptcy estate.
Co-signers Stay on the Hook
Bankruptcy protects only the person who files. If someone co-signed your personal loan, the lender can pursue the co-signer for the remaining balance. In Chapter 7, that pursuit can begin as soon as the automatic stay no longer applies to the lender’s claim.
Chapter 13 adds a co-debtor stay that halts collection against co-signers while your plan is active. A creditor can ask the court to lift it in specific situations: if the co-signer was the one who actually received the loan proceeds, if your plan does not propose to pay the claim, or if the creditor would suffer irreparable harm without relief.10Office of the Law Revision Counsel. 11 U.S. Code 1301 – Stay of Action Against Codebtor A plan that pays the loan in full leaves the co-signer with nothing to worry about. A plan that pays only a fraction leaves them responsible for the rest once the case closes.
Listing the Loan So It Actually Gets Discharged
For a personal loan to be discharged, you have to list it on Schedule E/F, the form for creditors with unsecured claims.11U.S. Courts. Schedule E/F: Creditors Who Have Unsecured Claims (Individuals) For each loan, you provide the lender’s full legal name as it appears on your loan documents, a current mailing address, the balance including accrued interest and fees, the account number, and the date you took out the loan.
Every personal loan belongs on the schedule: bank loans, payday loans, online lender balances, and debts owed to friends or family. If you leave one off and realize later, you can amend the schedules to add it, but the court charges $34 to do so. Building a complete list before you file saves the fee and the delay.
You also have to complete two educational requirements — credit counseling before filing and a debtor education course before discharge — through a provider approved by the U.S. Trustee Program. Skipping either can cause the court to deny the discharge entirely, which means the personal loans you were trying to clear would survive the case.12United States Courts. Credit Counseling and Debtor Education Courses
Costs and Credit Impact
The court filing fee is $338 for Chapter 7 and $313 for Chapter 13. Attorney fees for a straightforward Chapter 7 generally run from about $600 to $3,000; Chapter 13 fees tend to be higher but can often be folded into the repayment plan. Low-income filers may be allowed to pay in installments or, in limited cases, have the fee waived. The two required courses typically cost $10 to $50 each, with reduced rates or waivers available at household income below 150 percent of the federal poverty level.13U.S. Trustee Program/Dept. of Justice. Frequently Asked Questions (FAQs) – Credit Counseling
A bankruptcy stays on your credit report for up to 10 years from the filing date, under either chapter.14Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports? Filers with good or excellent scores often drop around 200 points; those already in the fair or poor range tend to see smaller declines of 130 to 150 points. Rebuilding can begin as soon as discharge is granted, and many filers see meaningful score improvement within one to two years through secured credit cards and consistent on-time payments.