Filing for bankruptcy is basically financial rock bottom, right? Not necessarily. If you’ve ever asked yourself, “Can personal loans be included in bankruptcy?” the short answer is yes—but the longer answer is where things get interesting. Whether it’s a buy-now-pay-later stack gone sideways or an old personal loan hanging over your head, bankruptcy can provide a reset. But the reset isn’t automatic, and it comes with big consequences.
So let’s break down what really happens to personal loans when you go bankrupt—and what that means for your credit score, your wallet, and your next financial move.
First, yes—most personal loans can be wiped out.
Let’s start with the good news. If you’re filing Chapter 7 bankruptcy in the US (which is the more common type for individuals), personal loans are usually considered unsecured debts. That means they’re not tied to any asset—like your house or car—and they can be discharged through bankruptcy.
In plain English: If your bankruptcy filing goes through, those debts are wiped out. Poof.
This typically includes:
- Personal loans from banks or credit unions
- Online loans and cash advance apps
- Peer-to-peer lending platforms
- Unpaid medical bills and utility bills
- Credit card balances
But here’s the kicker: not all loans get this “wipeout” treatment. Some types of debt follow you like a bad tattoo.
Even if your personal loan was used for an emergency root canal, that doesn’t mean all debt is treated equally in bankruptcy court. Some debts are protected from discharge, including:
- Student loans (unless you meet a super strict “undue hardship” standard)
- Child support and alimony
- Recent taxes
- Court fines or criminal restitution
- Debts you incurred through fraud (yes, even if it was unintentional)
Let’s say you took out a $10,000 personal loan a week before filing for bankruptcy and spent it all on electronics. That could be considered fraud. And if your lender objects in court, the debt might stick—even if everything else gets cleared. The lesson? Timing matters. Transparency matters. And judges don’t like it when you try to game the system.
Most people talk about bankruptcy like it’s one big hammer—but there are actually different types. And the kind you file changes how your personal loan is treated.
Chapter 7: This is the liquidation one. The court may sell off some of your assets to pay creditors, but in exchange, you get a relatively quick fresh start. Most unsecured personal loans get wiped here.
Chapter 13: This is more like a court-approved payment plan. Instead of erasing debt, you agree to repay part of it over three to five years based on your income and expenses. Some personal loans may still be partially repaid in this setup.
If you’re earning a steady income and have some assets you want to keep (like a house), Chapter 13 might make more sense. But it’s more commitment. Less wipeout.
Let’s say your mom cosigned a $15,000 personal loan to help you out. If you file for Chapter 7 and the debt is discharged, that doesn’t mean the lender forgets about her.
In most Chapter 7 cases, only you get the protection. Your cosigner? Fair game. The lender can go after them for the full amount.
Chapter 13 sometimes offers cosigner protection, depending on your payment plan. But it’s not guaranteed.
This is why many families who cosign don’t sleep well when bankruptcy gets mentioned. If someone helped you get that loan, make sure you talk to them before filing—because bankruptcy could torch their credit too.
Let’s get one thing straight: Bankruptcy will mess up your credit score. Like, hard.
A Chapter 7 bankruptcy stays on your credit report for 10 years. Chapter 13 sticks around for 7 years. That’s longer than most relationships last.
But here’s the flip side: If you’re filing bankruptcy, your credit score is probably already in rough shape. And after your debts are discharged, you may be in a better position to rebuild. Lenders know you can’t file for Chapter 7 again for 8 years. Ironically, that makes some of them more willing to offer you new credit (at high interest, of course).
Within a year or two of filing, you could qualify for a secured credit card. After a few years of responsible use, you might even qualify for a car loan or mortgage—depending on your income and payment history. So yes, bankruptcy hurts. But it’s not game over.
Nope. Bankruptcy doesn’t work like a shopping cart where you check off which debts you want to keep and which to ditch. When you file, you’re required by law to list all your debts—even the ones you want to keep paying. The court and trustee decide how it’s handled from there.
That said, you can voluntarily keep paying on a loan after bankruptcy if you want to—for example, to protect a relationship with a friend or family member who lent you money. But legally, they can’t come after you once the debt’s discharged. It’s your call—but choose wisely.
BNPL platforms. Cash advance apps. Digital-only lenders. Welcome to the Gen Z debt stack. These might not look like traditional loans, but legally, they’re often treated the same. If you owe Klarna, Afterpay, or a paycheck advance service and you file Chapter 7, those debts can usually be included—unless they’re tied to fraud, identity issues, or other legal flags.
But heads up: Some digital lenders may keep trying to auto-debit your account even after you’ve filed. So close old accounts. Freeze recurring charges. Get a new debit card if you need to. Bankruptcy protection is real, but fintech automation is ruthless.
Should you file bankruptcy over a personal loan?
Big question. Here’s a framework.
Consider bankruptcy if:
- Your total unsecured debt (credit cards + personal loans + bills) is way more than you can repay in 3–5 years
- You’ve tried consolidation or negotiation with no luck
- You’re facing lawsuits, wage garnishment, or aggressive collections
Avoid bankruptcy if:
- You only have one loan and could realistically pay it off with a side hustle or plan
- You’re about to apply for a mortgage or car loan soon
- You have assets you want to protect that could be sold in Chapter 7
Bankruptcy is a tool—not a shortcut. Use it when it’s the cleanest way forward, not just because the debt feels heavy.
Can personal loans be included in bankruptcy? Yes. But they’re not just a checkbox to delete—they’re part of a bigger system that includes your income, your assets, your goals, and your credit profile.
If you’re juggling late payments, skipped bills, and the shame spiral of collection calls, bankruptcy might offer relief. But it’s not an undo button. It’s more like a reset switch—one that locks some doors behind you but opens a few ahead.
Don’t just ask if the loan can be wiped. Ask: What do I want to rebuild next? Your post-bankruptcy life isn’t about coasting debt-free. It’s about structuring your finances so you don’t end up here again. That could mean living smaller for a while, automating your savings, or using a secured card to start rebuilding your score—slowly and intentionally.
Also, keep in mind that creditors talk. Some platforms share risk data across lending networks. If you defaulted on a personal loan through a flashy fintech app, don’t expect to be welcomed back anytime soon. Reputation and repayment behavior still follow you—even if the balance doesn’t.
Bankruptcy is a hard reset. But it’s also a second chance. Just don’t treat it like a hack. Be honest about how you got here, get real about what needs to change, and take the opportunity to build a stack that actually supports your future. If that sounds overwhelming, you’re not alone. But one intentional choice—made right now—can carry more weight than any single discharged loan ever will.
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