Three Things You must Know about Filing Bankruptcy to Get Rid of Payday Loan Debt

If you are considering filing bankruptcy in an attempt to get rid of your mounting payday loan debt, there are several things that you need to keep in mind. The US laws have certain legal provisions associated with bankruptcy payday loan cases. It is important for you to be well aware of the various legal aspects associated with the same. Following is a brief rundown on it.

The Basics

Since payday loans work differently as compared to the traditional lending programs, there are no specific guidelines on whether the amount of money you owe to such lenders should be discharged as part of the bankruptcy process or not.

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In most cases, it is entirely up to the judge to make a final decision in this regard. If you are lucky, you may be able to get rid of the debts resulting from such cash advances, but there’s no guarantee.

The Problem

When you are filing bankruptcy, you should usually wait for the final judgment from the court before you make repayments to your creditors. In usual circumstances, the laws impose a restriction on the creditors, prohibiting them from giving collection calls to the debtor (the applicant) or ask him/her to make the repayment. But, the problem here is that the creditors you owe the payday loan debt are usually backed by personal checks. So, they may try to cash those checks as soon as possible, particularly before the actual court proceedings start for your bankruptcy case. It is again up to the court to decide whether they will allow those creditors to retain the money thus received or will ask them to make a refund. In most cases, the court goes with the latter. After all, it is quite unfair that one creditor receives the payment even before the final judgment comes in while others get nothing even though they are entitled to get repayment in certain proportion. However, in some cases, even you may be held responsible for the automatic payment to the lenders of short-term cash advances.

Automatic Renewal of the Loan

Though the payday loan debt that you owe is actually a part of an unsecured loan, but the very fact that these loans are automatically renewed with certain amount of penalty charges every next month in case of non-payment, the lenders often try to use this fact in their advantage by making claim that the debtor (you, the applicant) is engaged in a fraudulent activity where he/she is filing bankruptcy just in order to get rid of the loans while the debts are less than 30 days old. Worse, some courts get convinced with this claim while others blame payday loan lenders for their predatory nature.

Things also depend very much on how different states look at payday loan debt. Many states these are days have started imposing certain legal restrictions on the financial instructions that offer these types of loans. For a clear picture on how filing bankruptcy will help you deal with this continuously growing debt problem, you are advised to get some legal help from a genuine and reputable lawyer who have experience in handling such cases.

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Posted in Bankruptcy, Filing Bankruptcy | 1 Comment »

One Response to “Three Things You must Know about Filing Bankruptcy to Get Rid of Payday Loan Debt”

  1. Sams says:

    The decision of filing a petition for Bankruptcy is not an easy task to complete. It is a very strong decision which needs a lot of thinking and knowledge of the whole process to follow. Pay Day Loans do not come under the category of other simple loans. There are not any specific guidelines for such loans whether the debt will be removed in the process of Bankruptcy or not, so think twice before filing the petition. Once you file the petition in the court, legally it is unfair if any creditor calls you for the payment or if he/ she try to cash the signed checks of yours. The court can order such creditors to make a refund to you. Still it is a very crucial part of the case, whether the money will be discharged or not. When you have time to wait for the final decision you can rewind some time and try to find out the reasons from where the problem started and why you are going to be bankrupt very soon. The whole scenario of this complicated process should be very clear to you if you have any doubts, you can talk to your lawyer

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