The same financial problems encountered by people who need to take out payday loans will also sometimes result in those people filing for chapter 7 bankruptcy. Whether it's due to poor money skills or an unexpected medical expense burden, payday loans are a useful, but costly, way to overcome a temporary financial crisis. However, if continuing financial issues sends you to bankruptcy court, you may find yourself owing a payday lender while declaring bankruptcy. Read on to find out how bankruptcy treats payday loans.
Normally, all debt that can be categorized as unsecured, can be discharged in chapter 7 bankruptcy. Commonly, unsecured debt is credit cards and personal loans that were lent without any collateral. Unlike loans on a home or vehicle, which are secured by the property itself, unsecured debt is nearly always able to be discharged, and therefore completely forgiven.
Payday loans are considered unsecured debt and may be forgiven through bankruptcy chapter 7 filing, however, you should be prepared for a representative for the payday loan company to make an appearance at your creditor's meeting. As you may know, the creditor's meeting allows your creditors to object to debt discharges, and debts that are incurred less than 70 days prior to the filling could trigger an objection.
This rule was created to prevent people from misusing bankruptcy to run up debt prior to filing with the sole intention of avoiding repayment. Since the courts have a generally bad opinion of payday lenders, who they consider predatory, you will likely be able to provide an explanation about the loan that will satisfy the judge.
For example, if you took out the payday loan for a car repair, which enabled you to keep your job, the debt would very likely be considered a debt that can be included in the filing and therefore discharged.
The Payday Loan Disclaimer
Most all payday loan documents contain a bankruptcy disclaimer or exception document, which you must sign in order to receive the loan. This document erroneously states that you cannot include a payday loan in any bankruptcy filing, and that by signing the form you are giving up your right to discharge the payday loan through bankruptcy. Make sure that you discuss this issue with your bankruptcy attorney, but these documents are normally used as a method of intimidation and have no standing in bankruptcy court. The payday lenders are counting on you to take the documents seriously and leave the payday loan debt off of your bankruptcy petition, which means that you will be inhibited from making the clean start that chapter 7 bankruptcy could provide.
Discuss your payday loan debt with your bankruptcy attorney for more information on how you can include that debt in your bankruptcy petition. For professional legal help, contact a company such as Michael D Hart PC.Share