Can Bankruptcy Eliminate Personal Loans and Buy Now, Pay Later Debt in Maryland?

A personal loan may have started as a way to consolidate credit cards, cover an emergency, or get through a difficult month. Buy Now, Pay Later plans may have seemed even easier because each purchase created only a few smaller installments. The trouble begins when all of those payments start competing for the same paycheck.

Bankruptcy can eliminate or restructure many types of consumer debt, including some personal loans and BNPL balances. Before you know how much relief bankruptcy may provide, however, you need to identify what kind of debt you actually have and how it was incurred.

Start by Identifying the Type of Loan You Actually Have

“Personal loan” covers several different lending arrangements. Two borrowers may both say they have a personal loan even though one has an ordinary unsecured installment loan and the other pledged property as collateral, and that distinction can affect what bankruptcy can do.

An unsecured lender generally has a claim against you but no lien on a particular piece of property. A secured lender may have rights against collateral even if bankruptcy eliminates your personal responsibility for the debt.

Unsecured Personal Loans

Many bank, online lender, credit union, and debt-consolidation loans are unsecured. You receive a fixed amount of money and agree to repay it in installments, but you don’t pledge your car, home, or another specific asset to secure repayment.

Qualifying unsecured personal loans can often be discharged in bankruptcy. That puts them in a different position from debts such as a mortgage or secured auto loan, where a creditor may retain rights against the property.

Secured Personal Loans

Some installment loans require collateral. You may have borrowed against a vehicle, savings balance, certificate of deposit, or another asset, which gives the lender rights that an ordinary unsecured creditor doesn’t have.

Bankruptcy may eliminate your personal liability on a qualifying debt, but a valid lien doesn’t simply disappear because you received a discharge. If you aren’t sure whether your loan is secured, review the agreement or have a bankruptcy attorney review it rather than relying on the lender’s marketing language.

Buy Now, Pay Later Debt Doesn’t All Work the Same Way

Buy Now, Pay Later has become a broad label for several types of installment financing. A common BNPL product lets you make a purchase immediately and repay it in four or fewer installments, while other checkout financing products may run longer, charge interest, or use different underwriting and reporting practices.

For bankruptcy purposes, the label matters less than the actual agreement. You need to know who the lender is, how much you owe, whether the obligation is secured, and what balance remains when you file.

Because dischargeability is primarily governed by federal bankruptcy law, the basic treatment of personal loans and BNPL debt isn’t unique to Maryland. Maryland-specific rules can still matter elsewhere in your case, particularly when exemptions and property are involved.

Small BNPL Purchases Can Turn Into a Large Monthly Commitment

One reason BNPL debt becomes difficult to manage is that each transaction looks separate. A $60 installment for clothing, a $90 electronics payment, and a $45 household purchase may not seem serious on their own, but several providers can pull money from the same paycheck within a short period.

That overlap can commit future income before you receive it. It can also be harder to see the complete picture if some pay-in-four activity doesn’t appear on your credit report in the same way as traditional revolving or installment debt.

If you’re considering bankruptcy, build your own BNPL inventory instead of relying only on a credit report. Check provider apps, email receipts, and recent bank or card statements, so you know which balances are still open.

Many Unsecured Personal Loans Can Be Discharged

Bankruptcy generally allows eligible consumers to discharge many ordinary unsecured obligations. If your personal loan is unsecured and no exception to discharge applies, Chapter 7 may eliminate your personal responsibility for the remaining balance.

In Chapter 13, unsecured claims are handled through a court-approved repayment plan. Depending on the facts of your case, qualifying unpaid amounts may be discharged after you successfully complete the plan.

The same general principle may apply to an unsecured BNPL balance. However, not every consumer loan is automatically dischargeable, and the circumstances surrounding how the debt was created can sometimes become important.

Recent Borrowing Deserves Special Attention

People sometimes worry that having a recent personal loan automatically prevents bankruptcy. It doesn’t, because you may have borrowed with every intention of repaying and then experienced a job loss, medical expense, income reduction, or another financial setback.

Bankruptcy law does contain exceptions for debts obtained through fraud, false pretenses, and certain false representations. A creditor that believes one of those exceptions applies can ask the bankruptcy court to determine that a particular debt shouldn’t be discharged.

Timing Rules Can Apply to Certain Recent Consumer Debts

Federal law also creates presumptions for some very recent consumer debts. For cases filed on or after April 1, 2025, certain consumer debts for luxury goods or services totaling more than $900 to a single creditor within 90 days before filing, and certain cash advances totaling more than $1,250 within 70 days before filing, are presumed nondischargeable unless the presumption is overcome.

Those rules don’t mean every personal loan or BNPL purchase made shortly before bankruptcy automatically survives the case. They do mean that recent borrowing deserves careful review, especially when it involves nonessential purchases, cash advances, or unusual spending.

Your attorney may need to understand why you borrowed, what information you gave the lender, what the money was used for, and what changed afterward. If bankruptcy has become a serious possibility, taking on unnecessary new consumer debt can create problems that an older, ordinary loan may not present.

Consolidation Loans Can Solve One Problem and Create Another

Personal loans are frequently marketed as a way to consolidate high-interest credit cards. That strategy can work when the new payment is affordable and the credit-card balances don’t return, but it fails when consolidation clears the cards without fixing the monthly shortfall.

Consider a household that uses a $20,000 personal loan to pay off several credit cards. If a medical bill or car repair forces those cards back into use, the household can end up owing the consolidation loan plus new credit-card balances.

At that point, another consolidation loan may only move the debt around. If your balances keep returning after refinancing, comparing bankruptcy with another round of borrowing may give you a clearer picture of your options.

Returns and Refunds Can Complicate BNPL Balances

BNPL creates a practical issue that doesn’t usually appear with a standard personal loan: merchandise returns. You might return a financed purchase after one or more installments have already been processed, while the merchant and BNPL provider are still adjusting the transaction.

If you’re preparing for bankruptcy during that period, the amount you owe may be changing. Keep records of returns, refunds, canceled orders, and disputed purchases, and don’t assume that a return automatically reduces the balance to the amount you expect.

Your bankruptcy schedules should reflect the best available information about what you actually owe. Identifying BNPL debt by provider and transaction can make that much easier than grouping everything together as general shopping debt.

Automatic Withdrawals Can Hide How Much You’re Really Paying

BNPL lenders commonly collect scheduled payments from a debit card, credit card, or bank account. When those withdrawals happen on different days, it can become surprisingly difficult to calculate how much of each paycheck is already committed.

Review at least a month or two of account activity and add up the payments going to installment lenders. What felt like several small purchases may turn out to be hundreds of dollars in recurring obligations.

If you file bankruptcy, tell your attorney which lenders have authorization to pull payments automatically. The automatic stay generally affects covered pre-bankruptcy collection activity, but you should follow legal guidance rather than falsely labeling a legitimate withdrawal as fraud or creating a separate dispute with your bank.

A Co-Signer Changes the Stakes on a Personal Loan

Some personal loans have more than one borrower. A parent may have co-signed to help you qualify, or you may have borrowed jointly with a spouse, partner, or family member.

Your bankruptcy relief doesn’t automatically erase another person’s contractual responsibility. That means the effect on a co-signer should be considered before you decide how to handle the loan.

Chapter 13 has a special co-debtor stay that can protect another individual from collection on certain consumer debts while the case is pending, although the protection has limits. Chapter 7 doesn’t provide the same general co-debtor protection, so make sure your attorney knows about every co-signed obligation.

Don’t Rely Only on Your Credit Report to Find BNPL Debt

A traditional credit report is useful when preparing for bankruptcy, but it may not show every BNPL obligation. Some pay-in-four activity has historically been reported differently from conventional credit products, which makes your own records important.

Useful places to check include:

  • BNPL provider apps and online dashboards
  • Confirmation emails from recent purchases
  • Debit-card and bank-account histories
  • Credit-card statements used to make installment payments
  • Text-message payment reminders
  • Collection letters or emails from third-party collectors

This review can uncover accounts you forgot because each individual purchase seemed small. Once you identify them, your bankruptcy attorney can determine how they should be listed and treated.

When Another Loan Stops Being a Solution

You don’t need to wait until every account is in collections before asking whether bankruptcy makes sense. A more useful question is whether your current debt strategy is actually reducing what you owe or simply replacing one payment with another.

You may be reaching the point where another loan isn’t solving the problem if you’re:

  • Borrowing to make payments on other borrowed money
  • Repeatedly consolidating balances that later return
  • Using BNPL for ordinary expenses because cash isn’t available
  • Missing installment payments despite cutting discretionary spending
  • Paying unsecured creditors while falling behind on rent, utilities, or other necessities
  • Facing lawsuits or collection accounts from older personal loans
  • Committing so much future income to installment payments that every payday is already spoken for

None of those circumstances automatically means you should file bankruptcy. They do suggest that comparing bankruptcy with continued refinancing may be more useful than simply searching for the next available lender.

Build a Debt Map Before Deciding What to Do

Instead of organizing your debts only by monthly payment, organize them by legal characteristics. Write down the lender, balance, whether collateral is involved, whether another person signed the agreement, when you borrowed the money, and whether automatic withdrawals are still active.

For BNPL debt, identify each provider and the purchases that remain unpaid. For personal loans, locate the original agreement when possible so you can distinguish ordinary unsecured debt from obligations that may require extra analysis.

Sirody Bankruptcy Center works with Maryland consumers who are dealing with personal loans, credit cards, collection accounts, and other debts that have become difficult to manage. We can review how those obligations fit into Chapter 7 or Chapter 13 rather than looking at one loan in isolation.

Find Out Whether Your Personal Loans Can Be Addressed Through Bankruptcy

Personal loans and Buy Now, Pay Later debt can create different legal and practical issues, even when both require regular payments. The right bankruptcy analysis starts by identifying what you borrowed, whether the debt is secured, whether anyone else is responsible, and whether recent borrowing creates additional concerns.

If you’re repeatedly refinancing debt or watching installment payments consume more of every paycheck, Sirody Bankruptcy Center can help you evaluate what Chapter 7 or Chapter 13 may change. Contact our team to review your debts and determine whether bankruptcy can provide a more sustainable path forward.