Payday Loans

Things That You Must Know About Payday Loan Bankruptcy

Payday loan bankruptcy has emerged as one of the serious issues that American consumers are facing these days. With the rapidly growing popularity of short-term risky cash advances, hundreds and thousands of consumers are getting themselves trapped into extreme payday debts, getting out of which often becomes impossible for them and they eventually end up getting bankrupt. Many people do not even know if bankruptcy petition can be filed for payday debts. Following is a brief rundown on some of the very basic things that you must be well aware of in this regard.

Payday Debts Are Treated Just Like Other Unsecured Debts

When it comes to payday loan bankruptcy, the first thing that is very important for you to keep in mind is that despite the unconventional nature of payday loan programs, they are treated just like any other unsecured loans in a bankruptcy case. It means the bankruptcy code applicable in the United States of America allow you to apply for bankruptcy protection if you are trapped in a debt situation where you have no better alternatives to get out of the same. Depending upon your specific situation, you may be eligible to file your petition either under chapter 7 or chapter 13.

Chapter 7 Bankruptcy

In chapter 7, the court will issue orders for wage garnishment and liquidation of all your assets and properties except the ones that are protected under bankruptcy exemptions as per the provisions of either state or federal laws (whichever is applicable in your case). The bankruptcy trustee then pays all your debts off with the proceeds thus received.

Chapter 13 Bankruptcy

In cases of payday loan bankruptcy under chapter 13, the court allows you to keep all your assets and continue with your business (no wage garnishment order is issued), but makes it mandatory for you to start making the repayment toward your payday debt accounts as per a more affordable, new repayment plan as proposed by the court.

How It Affects Your Credit?

Payday loan bankruptcy is like any other type of bankruptcy. It means though it provides you debt relief and gives you an opportunity to give a fresh start to your financial life, the road to financial recovery is usually not an easy one. It is very important for you to keep in mind that bankruptcy for payday loans stays on your credit report for a period of 7-10 years. There is no way to get these negative entries removed from your credit report before that long a period. However, there are still ways to improve your credit worthiness and credit score by working on some other crucial factors, such as timely repayment on your future debts and bills, responsible use of a good mix of credit, and other such things. It is just that you will have to keep a great deal of patients because even such strategies take some time before they can result in a significant increase in your credit score.

Overall, it I never an easy thing to decide whether payday loan bankruptcy can be a good option to get rid of your payday debt problems. You are strongly recommended to use only as the last option, when you have tried all other alternatives and failed. For expert financial suggestion, you always have an option to sign up with a licensed credit counselor.

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