Your Payday Loans in Bankruptcy

Payday loans are short-term loans that typically carry very high interest rates. They are often referred to as “cash advances.” If you take out a payday loan and you are unable to repay it in a timely manner, the high interest rate results in you accumulating debt quickly. Many debtors ask whether bankruptcy can eliminate this type of debt. In short, the answer is “yes in most circumstances.” A payday loan is an unsecured debt. Thus, this loan is typically dischargeable in a Chapter 7 filing. It is treated like other unsecured debts in a Chapter 13 filing, which means the debtor pays a percentage, if anything, of what is owed. Typically, unsecured creditors receive pennies on the dollar under a Chapter 13 plan. To prevent fighting over money during your bankruptcy filing, it is important to close the bank account if your payday loan involves a post-dated check. Likewise, if you consented to the creditor automatically deducting money from your bank account, you should close the account prior to your filing. It is important for debtors to understand that the lender of the payday loan can challenge your attempt to discharge their debt, but these challenges are rarely successful. Court generally do not look favorably upon the payday loan industry.  Of course, most lenders will only challenge the discharge if the amount of the loan is worth their time and effort. Finally, if a payday lender alleges that you wrote a “bad check” and threatens to file criminal charges against you, this type of action may be a violation of numerous laws, including the automatic stay. If you are considering filing a bankruptcy case and you have one or more payday loans, you should discuss it with your attorney at Levitt & Slafkes. We are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation.