What Is the Best Way To Get Out of Personal Loan Debt on a Small Income?

 Posted on May 16, 2026 in Personal Debt

People often take out personal loans when money is tight, hoping it will help them get training for better employment, get their business off the ground, or buy them time to make more payments. If these strategies don’t go to plan, they can find themselves in even more debt while still on that small income. 

If this is sounding familiar, you still have options. An Arlington, TX bankruptcy lawyer can review your situation and help you understand what makes the most sense for you in 2026.

Why Is Personal Loan Debt So Difficult To Escape on a Small Income?

Personal loans are unsecured debt. No house or car is backing them up. That sounds like it should make them easier to deal with, but the opposite is often true. Without collateral, lenders charge higher interest rates. When income is limited, it can feel like you're running in place.

Common strategies like debt consolidation or credit counseling can help in the right circumstances, but they still require you to repay what you owe. If someone just needs time to get back on their feet and equalize their savings and spending, this can work. For people on very small incomes, however, it just may not be feasible. In these cases, other legal remedies might be the best solution. 

Is Chapter 7 Bankruptcy a Good Solution to Personal Loan Debt In Texas?

Bankruptcy is often thought of as a last resort, something you only do if you've failed. For someone on a small income dealing with personal loan debt, Chapter 7 bankruptcy is often the most effective option available.

Chapter 7 allows a court to discharge most unsecured debts, including personal loans, credit cards, and medical bills. Once discharged, those debts are gone. Creditors can no longer pursue you for them. The process typically takes four to six months from start to finish.

To qualify for Chapter 7, you have to pass what's called the means test under 11 U.S.C. § 707(b). It compares your average monthly income over the past six months to the Texas median income for your household size. If you're on a small income, there's a good chance you qualify. 

What Happens When You File for Bankruptcy?

The moment you file for bankruptcy, something called an automatic stay goes into effect. This immediately stops:

• Collection calls and letters

• Wage garnishments

• Lawsuits from creditors

• Bank account levies

This can offer significant relief even before your case is complete. 

What if Chapter 7 Isn't Right for My Personal Loan Debt?

Not everyone qualifies for Chapter 7, and some people have reasons to consider other options even when they do qualify. Certain debts, such as most student loans, recent taxes, domestic support obligations, and some court judgments, may not be dischargeable. 

Chapter 13 bankruptcy lets you reorganize your debt into a three-to-five-year repayment plan based on what you can actually afford. It's often used by people who have assets they want to protect or who are behind on a mortgage and need time to catch up. 

Debt settlement is another option. This involves negotiating with creditors to accept less than what you owe. It can work in some cases, but it often comes with tax consequences and credit damage. There’s also no guarantee that creditors will cooperate, and it doesn't provide the legal protection that bankruptcy does.

Is Chapter 7 Bankruptcy the Fastest Way To Get Rid of Personal Loan Debt?

Chapter 7 cases tend to move relatively quickly, which matters when you’re trying to keep your head above water. Filing triggers immediate protection through the automatic stay.

Working with an attorney who handles these cases efficiently will help you get through the process as quickly as possible. The sooner you can make a decision about what’s right for your situation, the sooner you can put down the stress of your debt and start moving forward again.

Call a Wise County, TX Bankruptcy Lawyer Today

If personal loan debt is overwhelming you, you should explore your legal options for discharging it. Our Arlington, TX bankruptcy attorneys can complete your case entirely virtually, and we pride ourselves on an extremely fast turnaround. We offer free consultations, and each case is handled by an attorney, not a paralegal. Call Acker Warren P.C. at 817-752-9033 today.