Payday Loans and Bankruptcy

Because You Are Struggling Financially, Payday Loans are Common to Bankruptcy

Payday loans and bankruptcy often go together. Bankruptcy can discharge payday loans, but you need to be careful. Payday loans are nothing more than unsecured debts. Easy to get, and very difficult to pay off, these loans spell trouble for most everyone. My clients ask me about payday loans and bankruptcy almost every single day. Staggering interest rates as high as 324% make these loan the most dangerous and difficult debts for consumers to handle. Getting rid of these loans in bankruptcy is very common.

Discharge Payday Loans in Bankruptcy

Because these are totally unsecured debts, payday loans are discharged in bankruptcy. My clients sometimes are afraid to file bankruptcy on these loans, because the application form they fill out asks if they intend to file a bankruptcy. However, the payday loans and bankruptcy law DOES provide a way out of these awful, predatory loans.

Often, I am asked if people go out and get payday loans and bankruptcy is secretly in their minds to file? Usually, the truthful answer is no. Usually, people get payday loans in a last-ditch, desperate attempt to avoid bankruptcy. I’ve been discharging these loans in bankruptcy for decades and never had a problem getting them wiped out.

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Problems Discharging Payday Loans in Bankruptcy?

Cash advances totaling more than $1,000 incurred within 70 days of filing your case are presumed to be not discharged. (The $1,000 amount applies April 1, 2019, to March 31, 2022.) While this is the “black letter law” I have seen in practice no cases where the payday loans attempt to file any kind of action against my clients when the rule appears to be applicable.

Intent to Defraud Creditor is a Problem – You Could Get Sued in Bankruptcy

Creditors can file an Adversary proceeding (a lawsuit filed against you in your bankruptcy case) seeking a court order that your debt to them is not discharged because you never intended to pay it back. This is one reason it is a bad idea to “run up your debts” prior to filing bankruptcy. Bankruptcy and payday loan law permits creditors to ask the court to make you pay these, in other words, no discharge.

Any unusual activity, especially large purchases or increased charges, prior to a bankruptcy filing often trigger increased creditor attention. When you intend to file, don’t try to “use up” all of your available credit. This creates difficulties for you.

When you are in desperate financial need, payday loans are an option. If you can pay them off, quickly, you may be able to use them to your advantage. However, if you use them to finance normal living expense or to pay other ongoing debts, this is a huge red flag.

When this happens, you should talk with someone who is trained and certified, and has decades of experience in all the different debt relief options. Richard West is trained, and certified and experienced in all debt relief options. He’ll make sure you know what not to do, as well, like relying on payday loans.

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