Can You Legally Get Out of a Personal Loan in Texas?

 Posted on November 07, 2023 in Bankruptcy

Taking out a personal loan provides fast access to cash when you need it. But if you fall behind on payments, the crushing debt can feel inescapable. Are there any legal avenues for relief from an overwhelming personal loan in Texas? You have a few options, but each has pros and cons to weigh carefully. A Texas lawyer can help you sort out your best options.

File for Bankruptcy

One way to legally discharge personal loan debt is through bankruptcy. The two primary bankruptcy routes in Texas are Chapter 7 and Chapter 13:

• Chapter 7 liquidates assets to pay creditors and eliminates remaining debts, including personal loans. To qualify, you must pass a ‘means test’ based on income and expenses. While it discharges the debt, a Chapter 7 bankruptcy can severely damage your credit for years.
• Chapter 13 restructures debts like personal loans into a 3-5 year repayment plan based on disposable income. This halts collections and gives you time to pay. But if you default on trustee payments, collections resume along with potential credit impacts.
• Before pursuing bankruptcy, be sure to receive credit counseling from a HUD-approved agency. This step is mandatory before filing and will help you understand the process and alternatives. Bankruptcy should be viewed as a last resort due to the lasting negative credit impacts.

Attempt Debt Settlement

Settling your personal loan for less than you owe is possible if the lender agrees. This debt settlement approach involves communicating your hardship, providing detailed financial documentation, and negotiating a discounted lump sum payoff amount. Settlement helps avoid bankruptcy but may still damage credit and result in taxable forgiven debt.

Pursue Debt Consolidation

Debt consolidation rolls multiple debts, like a personal loan, into one new consolidated loan with lower monthly payments. To make this work, you must qualify for the new loan at a lower interest rate and have enough income to manage the revised payment terms over an extended period. While it buys time, consolidation increases the total interest paid.

Contact a Fort Worth, TX Payday Loan Attorney

The best path forward depends on your specific financial situation. Seeking legal advice can help you navigate the pros, cons, and fine print when considering these options. Relief from an overwhelming personal loan is possible, but proper guidance is key. Working with a Parker County, TX payday loan lawyer can help determine what the best steps would be for your specific case. Call Acker Warren P.C. at 817-752-9033 for a free consultation.