5 Things You NEED to Know about Bankruptcy and Payday Loans

1.       Payday loans are treated differently in Chapter 7 and Chapter 13 Bankruptcy.

Most people filing a personal bankruptcy use either Chapter 7 or Chapter 13. Chapter 7 is a liquidation of unsecured debts which usually takes about 4-6 months. Chapter 13 reorganizes your debt into a consolidated payment plan which will last 3-5 years. Filers must include all debts on their bankruptcy petition. A payday loan is likely to be dischargeable in a Chapter 7 because it isn’t attached to any property. However, Chapter 13 filers will repay at least a portion of their unsecured debts through their payment plan. Some or all of the balance will be spread out over the 3-5 year plan.

2.       The Automatic Stay might not protect you if you have Payday Loans.

Once either a Chapter 7 or Chapter 13 bankruptcy petition is filed, the Automatic Stay becomes effective. This prevents your creditors from garnishing your wages and repossessing your home and car. However, if you have a payday loan, you may have been required to give a post-dated check for the balance of the loan. The loan company would cash this check if you fail to make your payments. Filing bankruptcy doesn’t prevent the payday loan company from attempting to cash this check. You will also be liable for overdraft fees if you don’t have the available funds in your account. You may be able to close the associated account or put a stop payment on the check, but you should discuss these  possibilities with your attorney to determine which would be most effective for your situation.

3.       You can’t take out payday loans right before a bankruptcy.

Your bankruptcy trustee will be examining your case and any debts you incurred within 70 days of your bankruptcy. Any debts of $750 or more that were incurred during this time frame are presumed to be fraudulent- meaning you took out the loan with the intention of discharging it in your bankruptcy. If you take out a payday loan too soon before your bankruptcy, you will remain liable for it after the rest of your debts are discharged.

Payday loans have a predatory reputation and have been outlawed in many states. If you renewed your payday loan, the court is likely to interpret the 70 day time period as the original date you took out the loan. You should consult a bankruptcy attorney if you have any concerns over potential timeframe disputes with your lender. You should know that you can’t be sent to jail for failure to make payments on a payday loan.

5.       Zero Down Bankruptcy exists for those who can’t save up for a bankruptcy attorney due to paying off payday loans and other debts.

Because payday lenders usually have a post-dated check from you as collateral for your timely payments, debtors will usually prioritize this debt highly in their monthly expenses. Having the entire balance deducted from their account, combined with overdraft and other possible fees, can create compounding financial issues. Bankruptcy discharges all debts incurred before the petition is filed, including attorney’s fees. Because of this, many bankruptcy attorneys require their clients to pay their entire balance, both the court filing fee and their legal representation fees, up front.

Whether you have concerns about your payday loans, or you want to learn about how an Nevada Zero Down Bankruptcy could benefit you, our Experienced Bankruptcy Attorneys are available to answer your questions. Initial consultations are free, even if you choose to file with someone else or on your own. Call to schedule your free consultation today.