Payday loans are short term loans mostly taken by the lower income group of people to pay for immediate expenses. The good thing is that payday loans are generally easy to obtain but the bad thing is that these loans usually accrue high interest rates. Due to these high 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.
So what happens to your outstanding payday loans when you file a bankruptcy petition? It will be treated the same way as your other debts without collateral such as credit card debts. As an individual, you would be filing either Chapter 7 or Chapter 13 bankruptcy. In both cases, your payday loan will be discharged, meaning you would no longer be liable to repay it.
In Chapter 7 bankruptcy, your payday loan will be lumped together with all your other unsecured loans and your non-exempt assets will be used to pay off your debts through liquidation. In Chapter 13 bankruptcy, the bankruptcy court approves a repayment plan to pay off your debts (including your payday loan) 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. But if it can be proven that you took up the loan without any intention of repaying it, your payday loan may not be discharged.
In the first place, you should be aware of your borrower’s rights when engaging with payday loan lenders. Some states have regulations in place that limit interest rates of the amount you borrow. Call us at (813) 200 4133 for a free consultation on bankruptcy and how it can help you discharge your payday loans and other debts.