If you have payday loans, you’re not alone. According to recent reports1, 12 million people apply for payday loans every year in the United States. For households struggling to make ends meet, payday advances may be a necessity to pay their bills and support their families. But what happens if you can’t repay it?
If your debts become overwhelming, bankruptcy can give you a fresh start. Fortunately, payday loans can be a part of your bankruptcy proceeding. It’s important to know how payday advances work in bankruptcy and what to expect. Here are three things you need to know about the process explained by our Las Vegas bankruptcy lawyers.
1. Payday Loans Can Be Discharged in Bankruptcy
Most payday loans are unsecured. That is, you don’t have to put up your car, your house, or other property as a guarantee that you’ll pay back the loan. As far as bankruptcy is concerned, they’re a lot like credit cards. You get the funds on the promise that you’ll pay, but you don’t have to guarantee it with collateral.
In addition, payday advances are treated a lot like credit cards in bankruptcy in that they are dischargeable. As you file for bankruptcy, you can ask the court to dismiss them. That means you don’t have to repay them.
If you’re considering bankruptcy in Las Vegas, contact DeLuca & Associates today to schedule a free consultation.
What Happens in a Chapter 7 Filing?
In a Chapter 7 filing, payday loans are not a priority filing. Your non-exempt assets may go towards what you owe. There’s a good chance that your payday advances are going to be discharged without being paid. However, working with an experienced lawyer can help you take the right steps to ensure this happens.
What Happens in a Chapter 13 Filing
In a Chapter 13 filing, you repay debts based on your disposable income. Payday advances are included in the payday loan consolidation repayment plan, but a significant amount may also be discharged if a hardship occurs.
In other words, if you’re struggling to pay bills because of a payday loan, there is a good chance filing bankruptcy can benefit you. Contact the Deluca & Associates bankruptcy attorneys for a free consultation about how we may be able to help you.
2. You Can Receive an Automatic Stay As Soon as You File
Having your bills pile up with no way to pay them can create an extremely stressful situation. You need relief now. Fortunately, payday loans can be part of an automatic stay that you receive as soon as you file for bankruptcy.
An automatic stay stops all debt collection efforts when the bankruptcy begins. Any payments and recovery of outstanding debt must go through the bankruptcy proceeding rather than through the direct efforts of the lender. It can be a little bit more complicated than that. There may be the question of a post-dated check submitted to secure the loan.
Our lawyers can help you understand your rights and what to expect in terms of an automatic stay of collections when you file. To receive an automatic stay, and to include the payday loans in your bankruptcy discharge, you must declare them as a debt when filing bankruptcy.
3. It May Be Important To Wait a Certain Number of Days To File
One of the things you can’t do is rack up a lot of debt right before you file for bankruptcy. It wouldn’t be fair to take on new debt knowing that the recipient isn’t going to make an honest effort to repay it.
To combat this problem, bankruptcy filers can’t discharge debts taken on right before they file. For cash advances, anything taken out within 70 days of filing may create a red flag. There are other prohibitions for luxury purchases.
We invite you to meet with our lawyers for a consultation to understand the best time to file and how to structure your filing to maximize the benefits.
See how bankruptcy can help you get a fresh financial start. Contact our team today to schedule a FREE consultation!
Payday Loans and Bankruptcy FAQs
Are payday loans dischargeable in bankruptcy?
In general, yes, they are dischargeable in bankruptcy. They are seen as unsecured debts that may be discharged or made part of a payment plan.
What types of payday loans may be discharged in bankruptcy?
Some types that may be discharged in bankruptcy include:
- Payday loans
- Paycheck advances
- Cash advances
- Advances on your check
- Short-term loans at a high rate
Any loan amount that helps tide you over until your next paycheck may qualify as a payday loan. These types of loans may be discharged in bankruptcy.
Can I file bankruptcy on a payday advance?
If it wasn’t taken out right before you filed, you can file bankruptcy on a payday advance. Even if the loan is recent, you may complete a repayment plan through a Chapter 13 filing (that may include wage garnishments) to satisfy the debt.
Do you have to give up anything to discharge payday advances in bankruptcy?
Like other debts, the court may take non-exempt property to pay debtors. However, there are generous exemptions that exist in the law. Our lawyers can help you understand what you can keep and how to maximize the benefits of filing your case.
How can bankruptcy help with payday advances and other debts?
Because of their high-interest rates, payday advances can create a vicious cycle. A relatively small amount can quickly become overwhelming. The borrower may need another loan just to pay off the first one, or even just to pay the interest on the first one.
Usually, a person with payday advancement debts has other debts – high credit card balances, car loans, or even an outstanding mortgage. Our lawyers can help you evaluate the big picture. We can ensure that payday advances are addressed as part of thorough representation in your entire proceeding.
DeLuca & Associates is ready to help you get out of debt for good. Contact our team to learn more.
Bankruptcy Lawyers for Payday Loans Near Me
Are you struggling to pay your payday loans? Bankruptcy may help. Let our lawyers evaluate your situation and create a customized plan to help you break the cycle of debt for good. We can explain how bankruptcy can impact your payday advances and how we get the best possible result for your bankruptcy filing. Contact us today for your free consultation.
1Haughn, R. (28 February 2022). Payday loan statistics. Bankrate. Retrieved 23 May 2022.