When financial pressure builds, many Pennsylvanians turn to personal loans or payday loans to stay afloat. Unfortunately, these high-interest debts can quickly become unmanageable. If you are considering bankruptcy, you may be wondering what happens to these types of loans and whether they can be eliminated. Understanding how bankruptcy treats personal loans and payday loans can help you make informed decisions about your financial future. At Tadross Law, we can guide the Pennsylvania public through every step of the process.

How Bankruptcy Treats Personal Loans

Personal loans—such as bank loans, credit union loans, and online installment loans—are typically unsecured debts, meaning they are not backed by collateral. Because of this, they are generally dischargeable in both Chapter 7 and Chapter 13 bankruptcy.

• Chapter 7 Bankruptcy: Most unsecured personal loans can be eliminated entirely once your case is discharged. You will no longer be legally responsible for paying them back.
• Chapter 13 Bankruptcy: Instead of eliminating the debt immediately, you enter a repayment plan lasting three to five years. Many borrowers pay only a portion of what they owe, and the remaining balance is discharged at the end of the plan.

In both chapters, lenders must stop collection efforts—including calls, letters, wage garnishments, or lawsuits—once you file.

What Happens to Payday Loans in Bankruptcy?

Payday loans are also unsecured debts, so they are generally dischargeable. However, payday lenders may attempt to challenge the discharge under certain circumstances.

Potential Issues With Payday Loans

• Recent borrowing before filing
  If you took out a payday loan shortly before bankruptcy, the lender may argue that you never intended to repay it. This can lead to a challenge in court, but each case depends on timing and circumstances.
• Post-dated checks or ACH withdrawals
  Once you file bankruptcy, lenders must stop all attempts to withdraw money from your bank account. Continuing to do so may violate the automatic stay.
• Threats of criminal charges
  Payday lenders sometimes warn borrowers that bounced checks could lead to criminal penalties. In most cases, this is not true. Bankruptcy courts view payday loan debt as civil, not criminal.

Overall, payday loans are treated much like other unsecured debts and are often dischargeable.

The Automatic Stay: Immediate Protection From Collectors

As soon as you file for bankruptcy, an automatic stay goes into effect. This powerful legal tool stops:

• Wage garnishments
• Bank account freezes
• Collection calls
• Lawsuits
• Attempts to withdraw payment on payday loans

This relief gives you time to reorganize your finances without constant pressure from creditors.

Can Payday or Personal Loan Lenders Object?

While objections are rare, lenders may challenge your discharge if they believe:

• You lied on your loan application
• You borrowed money knowing you intended to file bankruptcy immediately
• Fraud was involved in the loan process

Even when objections occur, many borrowers still receive a discharge. Having legal guidance can greatly strengthen your case.

How Tadross Law Helps Pennsylvania Borrowers

If you feel trapped by payday loans, personal loans, or other unsecured debts, bankruptcy may offer a path toward financial stability. At Tadross Law, we assist the Pennsylvania public by reviewing your debts, determining whether bankruptcy is appropriate, and helping you file with confidence.

Debt relief is possible—no matter how overwhelming your situation feels.