Can you file Bankruptcy on payday loans and discharge them? LEARN MORE!

Filing Bankruptcy On Payday Loans

Can you file bankruptcy on payday loans? Many debtors find themselves in need of a quick-fix type of loan due to medical bills, car repairs, or whatever. Because they may have poor credit, they are enticed to take out payday loans. A payday loan is a short-term general loan dependent upon the debtor being employed. They usually have relatively high annual interest rates and are generally due within the next pay period of the debtor. Often the debtor for these loans must allow payment in the form of a direct debit from the debtor’s bank account.

Unfortunately, in some states, when  the payday loan becomes due (on the debtor’s next payday), the debtor cannot afford to pay the balance which, by now, has interest attached. The debtor then rolls that loan over into another loan with the lender or finds another payday loan lender and the grind begins. Debtors will then continue to finance one payday loan with another until the his or her finances are a complete mess. Debtors are usually subject to frequent collection calls and other attempts to collect the debt. Learn more about Payday Loan regulations under California Law.

Bankruptcy Help With Payday Loans

Yes, you can file bankruptcy on payday loans. Payday loans may be discharged in bankruptcy as any other debt.  Furthermore, under the law, these lenders must cease all collection calls and attempts to collect the debt once the bankruptcy is filed. 
 
One problem is the maintenance of the electronic debits on debtor’s bank account after a bankruptcy is filed. In bankruptcy, you will need to immediately revoke authorization you have given to allow the payday lender to maintain electronic debits on the bank account. You will then receive a bankruptcy discharge of the payday loans either in Chapter 7 or Chapter 13.   Bankruptcy wipes out the payday loan! But you must be careful.
 
If you do not qualify for Chapter 7, you may file Chapter 13 to make a repayment plan over a period of 3 to 5 years. The Chapter 13 plan will provide for monthly payments to a Chapter 13 trustee who disburses funds every month to the creditors, including payday lenders. During the 3-5 year period, the payday lender may not attempt to collect its debt or initiate court proceedings. Once the debtor finishes the plan, the debtor obtains a Chapter 13 discharge of the payday loan.

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