By bankruptcy, we mean the ways to avoid the insolvency when the person is totally empty in terms of finance
. When a person is declared insolvent, the reports of his credit and other financially important documents along with the list of unsecured loans still outstanding are sent to the court. Although the levels and types of insolvency differ from case to case but the court is involved in every case. Never thinks that your lender who has given you unsecured loans wants you to become insolvent or to make you lose your money in any case. In any of the problem, the lender also gets affected and its actually his money which is drowned.
The unsecured loans are already in risk when they are given to the borrowers. Nobody claims to become a sound customer for a life time as any bad thing can happen to anyone. The main reason why you got unsecured type of loans was your credit report and your clear and trust worthy credit history. There is no security against your unsecured loans and the lenders dont have anything to cover the loss if you become bankrupt.
So when any borrower faces the situation of insolvency and still having loan to pay, he should immediately contact the lender at first. He has become unable to fulfill the responsibility which he took while getting the loan. He must discuss the position of his finances with his lender. Although it is not the responsibility of the lender to help the borrower and give more loans but in some cases it worked. So it is an option if you face same situation.
Keep in mind that the unsecured type loans have no security or collateral. So the loss is all of lender. There is no asset which lender can use to sell and cover his lost money. There is only one security and that is the ability of the borrower to re-pay the unsecured loans and his credit worth. So if the lender doesnt help you out, dont worry as it is his loss more than it is yours. If he settles the situation with the borrower, positions may prove positive but if not, lender will be in loss.
There is also another way to pay off the loans when the borrower becomes insolvent. This way is of considering the liquid assets to pay the amounts of unsecured loans. If you used credit lines to pay the price of the goods bought then it is beneficial to cover the amount of unsecured loans with this. You must be aware of the relation between the close relation of assets and the unsecured loans. You can use the goods purchased to help cover the amount of unsecured loans. In most of the cases, the lenders agree to take the goods because sometimes the buyers are not available immediately.