Pay Day Loans and Bankruptcy
Payday loans, also known as a cash advance, are short-term loans borrowers
obtain against their next paycheck. While they seem convenient in helping
you get necessary expenses covered between pay days, many find themselves
trapped in trying to break the cycle of getting it paid without the need
to take it out again. Due to high interest rates, you end up repaying
more than just the original amount of the loan. If you have outstanding
payday loans, they may be eligible for discharge or be included in a repayment
plan if you are considering bankruptcy.
Payday loans are considered unsecured debt since collateral or an asset
of value isn’t required for the loan. In bankruptcy, they are treated
in the same way as other unsecured debt such as
medical bills and credit card debt. In this sense, they are discharged and the debtor
is no longer obligated to repay it. This is likely the scenario for either
bankruptcy chapter you file, as long as qualifications are met.
Chapter 7 bankruptcy wipes out or eliminates unsecured debt through a court-approved discharge.
If you file this chapter the payday loan debt should be listed as an unsecured debt.
Chapter 13 bankruptcy is a court-approved repayment plan based on your income. While you may
be required to repay a portion of unsecured debt you include in your filing,
the remaining that is unpaid will be discharged when the case is completed.
Borrowers should be aware of their rights when engaging with payday loan
lenders. Some states have regulations in place that cap interest rates
of the amount you borrow. If it is proven you had no intention of repaying
the loan a discharge may not be granted. Discuss questions and concerns
with your bankruptcy attorney in Dallas-Fort Worth.