When you faced a tight financial situation, a payday loan seemed like a lifesaver. However, while the loan might have offered you an immediate relief, the loan likely left you in an even worse financial situation. With the excessively high interest rates and strict payment guidelines, it's no surprise. If your payday loan concerns have spiraled out of control and you are facing financial catastrophe — bankruptcy might be an option.
Payday Loan Debt
When it comes to bankruptcy, the type of debt that you want to discharge, or restructure is the most important factor. Fortunately, payday loans fall into the correct category since they are an unsecured debt. For this reason, debt from an unpaid payday loan is treated very much like the debt you would have with a credit card account. As a result, you can legally attempt to include payday loans in your bankruptcy filing.
Bankruptcy is an umbrella term because the process can be executed in several ways; Chapter 7 and 13 are the most common. With a Chapter 7 filing, you can discharge the full amount of the payday loan without repayment. You'll need to prove, however, that your financial situation is so dire, and that you have no other options for repayment, that eliminating the debt is the best option. With a Chapter 13 filing, you can restructure the terms of the loan and organize a repayment plan that is suitable for your financial situation.
Date of Loan
One roadblock that some people who want to file bankruptcy for payday loans face are time restrictions. Bankruptcy is not intended to be a solution for a shopping spree or as a get rich scheme. So, you typically cannot include debts that were incurred within the last 60 to 90 days before you file. So, if you want to file bankruptcy for a payday loan that you recently acquired, you might not be able to do so.
Payday loan lenders often fall into the category of aggressive lenders. Many of these companies practice all sorts of techniques to get their money back. However, if you are successful in your attempt to file for bankruptcy, make sure you understand that legally, the payday lender must cease any of their collection activities. If the company attempts to draft money from your account or makes harassing calls to you, they are in violation of the law.
Your financial situation isn't likely to get better without any effort. If you can't see a way forward and you think you are a candidate for bankruptcy, you should speak with attorneys like those at Phoenix Law as soon as possible.