Payday Loans and Bankruptcy

Bankruptcy Attorney Dayton, Oh

It’s tempting to get a payday loan when you are behind on your bills. Payday loans offer cash advances at a high interest rate. Theoretically, the borrower needs the money for a short term and can pay it back reasonably fast to avoid additional charges and fees. Most of the time, payday loans are a last ditch effort to catch up on an important bill or make an emergency purchase. We are usually in dire financial need and not in the best place to add another bill to our pile of debt.

Since there is no collateral involved, payday loans are considered unsecured loans. As an unsecured loan, it is often lower on the list when we are paying our bills. Our home and car notes receive a higher priority to ensure we have a safe place to live and a way to get to and from our jobs, schools, doctors appointment stores, etc..

Payday loans can be the main reason some people file for bankruptcy. Getting further behind, the interest gets higher, and your credit scores are continually taking negative hits and the never-ending phone calls demanding you make a payment.

Give Immediate Notice to Payday Lenders

The payday lenders need to be notified immediately when you file bankruptcy since their collection methods generally differ from most loans. They use practices such as automatic debits from your bank account and postdated checks from the debtor. If you wait for the court to notify them of the automatic stay preventing them from any further collection actions, there may have been enough time for another payment to be made from your bank account.

Aggressive in Collection Practices

A common practice for payday loans agencies and third parties on their behalf is to threaten you with legal action stating you wrote them a “bad check” if the post-dated check you provided doesn’t cash. All collection attempts, harassing calls, emails, texts will stop when you file for bankruptcy under the automatic stay law.

Eliminated in Chapter 7

Payday loans are dischargeable in a Chapter 7 bankruptcy, meaning that they will be eliminated and you will not have to pay them back. If you decide to file for Chapter 13 bankruptcy, the payday debt will be added to the others and set up for a repayment plan. They will not get the priority of other debt, and after you have made your payments for the three to five years required, any remaining debt will be eliminated.

For more answers about payday loans, please contact a Columbus bankruptcy attorney to find out how you can break the payday loan cycle.

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