When financial struggles become overwhelming, many Louisiana residents rely on personal or payday loans to stay afloat. Unfortunately, these short-term solutions often come with high interest rates and aggressive collection efforts. If you’re considering bankruptcy, understanding how these debts are treated is key to finding real relief.

Personal Loans and Bankruptcy

Personal loans are typically unsecured debts, meaning they’re not backed by collateral like a home or vehicle. In a Chapter 7 bankruptcy, most unsecured debts can be fully discharged—this includes personal loans from banks, credit unions, or online lenders. Once discharged, you’re no longer legally obligated to repay them.

In Chapter 13 bankruptcy, instead of wiping out debts entirely, you create a repayment plan lasting three to five years. You’ll pay a portion of what you owe based on your income and expenses, and any remaining unsecured debt (like personal loans) may be discharged once the plan ends.

Payday Loans and Bankruptcy

Payday loans are also considered unsecured debts, so they can be discharged in both Chapter 7 and Chapter 13 cases. However, payday lenders sometimes challenge discharge if they believe the loan was taken out fraudulently—for example, if you borrowed money knowing you couldn’t repay it. Having an attorney guide you through this process helps prevent complications and protects your rights.

Stopping Collection Efforts

Filing for bankruptcy immediately triggers an automatic stay, which stops creditors from calling, suing, or garnishing wages. This includes payday lenders and personal loan companies, giving you breathing room to regain control of your finances.

At De Leo Law Firm, LLC, we can provide legal assistance to the Mandeville public. Our team helps clients understand how bankruptcy laws can relieve the burden of personal and payday loans while protecting their financial future.