Can You Get Rid of Payday Loans with Bankruptcy or Debt Relief?

 If you are behind on debts, the bills are piling up, and you’ve begun getting letters from PO box 25759 Greenville SC, waiting until your next paycheck may not seem realistic. Payday loans offer a fast, easy and reliable way to get money when you need it. However, it comes with its downsides and could cause financial hardships over time as it traps you in an unending cycle of debt. When going through a financial crisis, you might opt to file bankruptcy to eliminate debt. But are payday loans dischargeable in bankruptcy cases? Here is everything you need to know about payday loans and bankruptcy.

1. Are you Eligible to File for Bankruptcy?

Pay day loans can be discharged in a bankruptcy if they are unsecured.

Before considering filing for bankruptcy to discharge your payday loans, the first step should be identifying if you are eligible to file for bankruptcy. Use a Chapter 7 means calculator to test your eligibility.

If you are eligible, there are other factors to consider, like the cost of filing for bankruptcy. The costs of filing bankruptcy depend on where you live. So when doing your research, you should specifically look at the costs in your state rather than checking general costs for an accurate prediction. Here is a guide on how much it costs to file bankruptcy in Georgia and how much it costs to file bankruptcy in Colorado. You should also compare other debt-relief options and their pros and cons before filing for bankruptcy.

2. Should I Include Payday Loans When Filling Out Debts in My Chapter 7 Bankruptcy Case?

When filing for bankruptcy, the court will ask you to disclose your income, debt, and expenses. If you have an outstanding Payday loan, you should include it in your bankruptcy schedule alongside other debts, irrespective of whether the debt is dischargeable. Although most unsecured debts are dischargeable, payday loans aren't always dischargeable. If you don’t qualify for Chapter 7 bankruptcy, it may be worth your time to take a Chapter 13 payment calculator to see what your other options are.

Debts Incurred Less than Three Months Before Filing Bankruptcy

If you incur debts between 60 and 90 days before filing bankruptcy, these debts may not be eligible for discharge. The assumption is that you took out these loans in anticipation of filing bankruptcy, and you knew you had no means to repay. Therefore, it is fraudulent, and these debts cannot be discharged.

A major challenge payday loans pose is that most renew every 30 to 60 days. So, your lender may argue the debt should be non-dischargeable since they were incurred shortly before filing bankruptcy.

Agreements That May Prohibit You From Listing Payday Loans in Bankruptcy

Unique cases could prohibit you from listing payday loans under debts in your bankruptcy loans. Always go through the paperwork, terms, and conditions of the payday loan before signing. Some lenders add a clause stating the payday loan cannot be discharged in bankruptcy. However, the clause is not legally recognized and, thus, will not impact a discharge. So, if the court finds your payday loan eligible for discharge following federal bankruptcy laws, the clause added in the loan agreement will not prevent the court from issuing discharge.

How the Law Treats Bad Checks

Other than adding a clause to term the payday loan non-dischargeable, some lenders might also state you will go to jail if you attempt to close your bank account to avoid withdrawing funds or deposit a post-dated check under ACH authorization.

Usually, this is an invalid threat since the lender knew you weren't in a financial position to pay the electronic withdrawal or post-dated check when you signed the agreement. So, it is hard to prove your actions were fraudulent because the lender accepted a "bad check" and was aware of your financial position.

Can I File Chapter 7 Bankruptcy After Taking a Payday Loan?

It is not wrong to file Chapter 7 bankruptcy after recently taking a payday loan. However, if your payday loan is recent, it may not be dischargeable. So, if the lender objects to the payday loan discharge, you might be legally responsible for paying the loan despite filing for bankruptcy relief

Different States have Varying Laws on  PayDay Loans

The laws on payday loans vary according to state. Most states have laws governing payday loans since most are abusive to consumers. Payday loan companies are prohibited from automatically renewing the loan in other states, which is helpful since you might wait for months before filing bankruptcy to get debt relief.

3. Understanding How Payday Loans Work

While there isn't a standard definition for what qualifies as a payday loan, there are some characteristics all payday loans share in common. All payday loans are short-term loans that are repaid on the next payday (between two and four weeks or even 3 months) either from salary, social security, or pension and in a single payment. Payday loans are commonly referred to as payday, cash, or paycheck advance

Most lending companies ask their borrowers to submit a post-dated check for the full amount, including fees and interest. Some lenders may need their borrowers to sign an ACH authorization to enable electronic withdrawals from their bank account on specified dates.

Some of these payday loans can be renewed or rolled over, requiring the borrower to pay the interest and fees but allowing an extension of the principal amount for another period. Payday loans and fees are often high, and some lenders can charge high fees with an annual percentage rate of 400 or more. Thus, creating the need for regulation.

Although Payday loans come in handy and are easy to access, they often worsen financial problems. Most people who apply for payday loans soon get trapped in a cycle of rollover payday loans due to the inability to pay the original loan balance. Others borrow money from a different source to pay their Payday loans, increasing their debt further.

4. Should I Consult a Bankruptcy Attorney About Payday Loans?

If you want to file for bankruptcy, it is prudent to schedule a consultation with a bankruptcy attorney if you have a payday loan. Consider hiring a local attorney since payday loan laws vary according to state, and a local attorney understands these laws better.

A bankruptcy lawyer gives you reliable, professional advice on if your payday loan is eligible for discharge and offers alternatives to settle your payday loans. Depending on your case, an attorney can advise you to close your bank account and wait for at least three months before filing bankruptcy.

Each case is unique, and there is no sure way to know if your payday loan is eligible for a discharge. Hence, you need to consult a bankruptcy attorney to review your loan agreement, assess your financial situation and predict the outcome.

5. Are There Alternatives to Filing Bankruptcy to Get Out of Debt

You can consider debt relief as an alternative to bankruptcy, but you may want to consider the fees.

National Debt Relief and Freedom Debt Relief are two of the biggest players in the space. That said, you should consider the National Debt Relief pros and cons of this options as the fees can be quite expensive.

If you have fallen behind on your debt payments and still have outstanding payday loans to repay, you can try other debt-relief options. However, given the rise in malpractices as alleged in the Freedom Debt Relief Lawsuit, you should do extensive research on companies you plan to work with.

6. Where Can I Find a Chapter 7 Bankruptcy Lawyer for Hire?

Would you like to file for bankruptcy but have a payday loan? Seek the services of a bankruptcy lawyer to help you see if bankruptcy is the best option and if your payday loan will be discharged. Most bankruptcy attorneys offer a free consultation. So, get a local bankruptcy lawyer, and schedule your consultation. You can also ask your attorney to advise you on different debt relief options available to you and advice on alternative options to get rid of debt. Call us today to book your consultation.