JOE ASKED: I have personal loans with two different friends that alone equal $15,000. Can these loans be eliminated with personal bankruptcy? Can I keep my mortgage?
Personal loans are no different than any other debt. Filing personal bankruptcy can definitely eliminate personal loans owed to friends. There is a short list of debts which are not eliminated by filing personal bankruptcy. These undischargeable debts include debts incurred through fraud, support obligations and student loans where you have not ceased being a full or part-time student for more than seven years as at the date of filing.
With respect to your mortgage, filing personal bankruptcy does not affect the rights of secured creditors. Therefore if you file personal bankruptcy and want to keep your home you have to keep paying your mortgage. If you stop paying your mortgage, filing personal bankruptcy does not prevent the bank from enforcing their security and taking possession of your property.
The only issue you may have with filing personal bankruptcy is that you own your home. While it possible to file personal bankruptcy and keep your home, any equity in the property is an asset that your creditors would have an interest in.
I would recommend reviewing your entire financial situation with a licensed trustee in bankruptcy to make sure that filing personal bankruptcy makes sense. If you would like to speak with me personally please do not hesitate to contact my office.
