Payday Loans in Bankruptcy
Many hardworking American have trouble making ends meet each month. When unexpected expenses pop-up, many people are forced to take on loans and lines of credit.
For people with less than stellar credit, the easiest way to get a quick influx of cash is to take on a payday or checkbook loan. But these loans often wind up being more expensive than they seem, and can lead to even more debt problems.
Often, those struggling with repaying payday loans turn to the bankruptcy court to help ease their financial woes. Bankruptcy could wipe out payday loans and other unsecured debt, often in just a few months.
If you're ready to find out whether personal bankruptcy might help you conquer your debt, it's time to fill out this form to get in touch with a bankruptcy attorney.
Discharging Payday Loans in Bankruptcy Filings
The way payday loans behave in bankruptcy court depends on a number of factors. First, it matter which type of personal bankruptcy you choose, Chapter 7 or Chapter 13. Here’s a look at how payday loans might work in Chapter 7 cases.
- Unsecured debts in Chapter 7 bankruptcy: Payday loans are considered unsecured debt because they are not connected to any property (secured debts include things like car loans and mortgages – they're "secured" by the car or the house and the lender can seize these things if the borrower fails to make payments). Chapter 7 bankruptcy works by offering filers a discharge of certain unsecured debts. But not all unsecured debts are eligible for this discharge (forgiveness).
- Non-dischargeable debts in Chapter 7: Some debts, even thought they're not connected to any property, cannot be excused in bankruptcy court. These include child support and alimony payments, most taxes, federally funded student loans, criminal fines or penalties, and certain cash advances.
- "Last minute" debts: Another category of non-dischargeable debts are those that were incurred in the period directly preceding the bankruptcy filing. Specifically, purchases of "luxury" items that are made within 90 days of filing for bankruptcy and/or total more than $500 in value are generally non-dischargeable. Also, payday loans and similar cash advances totaling more than $750 that were taken out within 50 days of filing for bankruptcy cannot be discharged.
Payday Loans in Chapter 13 Bankruptcy
Chapter 13 bankruptcy filings work differently from Chapter 7 cases. Instead of a single, swift discharge, filers must adhere to a three- to five-year repayment plan that can allow them to catch up on many of their secured debts while at the same time staying current on any payments that come due during that time.
Depending on the types of debt you have, you may be required to make payments on payday loans as part of a Chapter 13 repayment plan, but there also may be a possibility that you will be excused from these payments, as long as you stick to the terms of your repayment plan. Even if you do have to repay the debts as part of the plan, you'll make payments to the bankruptcy trustee, and typically interest and fees will no longer accrue.
Ask a Bankruptcy Lawyer about Your Payday Loan Debts
Each person's individual circumstances play a major role in determining which debts might be discharged and which ones cannot be excused by the bankruptcy court. In order to get an idea of how your bankruptcy case might work, talk to a bankruptcy lawyer practicing in your area today.