When money problems seem overwhelming, many people turn to payday lenders. These loans are quick and usually easy to get since they are based on income from a job rather than your credit history. However, many people get caught up in a neverending web of renewing loans every month and that does nothing to help them financially. If financial troubles have you contemplating filing for chapter 7, you need to understand how payday loan debts are viewed under the bankruptcy rules. To find out more, read on.
You Can Include Payday Loans in Your Chapter 7
No matter what you might have heard, payday loans are dischargeable with a chapter 7 filing. Many filers are put off by the paperwork from the payday lender indicating that the loan cannot be discharged. That information is incorrect. Payday loans are not really secured to any piece of property so they are considered unsecured and can be listed on your bankruptcy paperwork. Be sure not to leave it off the debt matrix when you turn your chapter 7 bundle into your bankruptcy lawyer. However, you might encounter problems with this type of debt depending on the timing.
Recent Payday Loans: Use Caution
The time right before you file is often the worst, financially speaking. That, unfortunately, can mean some consumers turn more frequently to payday lenders in desperation. The bankruptcy court takes a hard look at any credit use or loans taken out in the last several months prior to a filing to ensure that the debtor is not taking advantage of the filing to rack up debts. Since payday loans often "renew" every month or so when the full balance is not paid, that renewal can be seen as using credit right before you file.
On the other hand, the bankruptcy trustee over your case knows that payday loans are predatory, usurious, and they understand how they work. It's not very likely that they will rule on the side of the payday lender if they object to their inclusion in the bankruptcy. If you have such debts, don't take out any new obligations in the 90 days prior to your bankruptcy to be on the safe side and to prevent additional hearings. Be sure to let your chapter 7 bankruptcy lawyer know about any payday loans that you want to include in the bankruptcy.
In addition, some payday lenders attempt to use the post-dated check you left with them to remove funds from your bank account. Inform your lawyer of this action immediately so that the trustee can order the lender to pay you back the funds. To find out more about payday loans and chapter 7, speak to your lawyer.
