Payday loans seem like an appealing option when you’re struggling to pay your bills and falling behind on monthly payments. Payday lenders that work with Chapter 13 (also known as cash advance companies or check cashing stores) offer short-term loans at a high interest rate. These payday loan companies are designed to help borrowers meet their financial burden until their next paycheck arrives. Chapter 13 payday loans are a real emergency for some people. This is especially true for those who use them when their financial situation is already tight. Sometimes, borrowers find themselves spiraling towards bankruptcy without even realizing it.
All attorneys at O’Bryan Law Offices have extensive knowledge of the U.S. bankruptcy code and are equipped to handle all types of bankruptcy cases, including Chapter 7 bankruptcy and Chapter 13 bankruptcy. When you choose a bankruptcy lawyer at our law firm, we address not only your legal and financial needs but also any emotional distress that comes with filing bankruptcy. If you have questions about your Chapter 13 payday loans, which payday lender will work with Chapter 13, or just how to get debt relief, we invite you to schedule a free consultation with us. Call a bankruptcy attorney at 502-339-0222 today.
What is a Payday Loan?
The Consumer Financial Protection Bureau defines pay day loans (also called paycheck advances) as “short-term, high cost loans, generally for $500 or less, that is typically due on your next payday.” These types of loans share certain common features. However, no concrete definition exists. Below, we list the characteristics many people see in a payday loan.
- They are loans for small amounts of money, with the limits ranging around $500, give or take. Kentucky limits its maximum payday loan amount to $500.
- Generally, borrowers owe money back on their next payday. Due dates range from two to four weeks after you took out the loan. Kentucky’s maximum loan term is 60 days.
- Lenders that work with Chapter 13 usually don’t consider a borrower’s ability to repay their loan.
- Payday loan fees range from around $10 to $30 for every $100 borrowed. Kentucky’s maximum fee is $15 for every $100 borrowed, plus a $1 database fee.
Qualifications for a Pay Day Loan
It’s really easy to get a loan from a payday lender in the U.S. In order to obtain a payday loan, you must:
- Be 18 years old or older
- Have a checking account that you use regularly
- Provide proof of total monthly income and future income
- Provide valid identification, such as a driver’s license or state ID
Can Payday Loans Be Included in Bankruptcy?
Yes, payday loans can be fully discharged in a Chapter 7 filing and partially discharged in a Chapter 13 filing. In Chapter 13 bankruptcy, bankruptcy courts will require you to repay your debt through a set repayment plan. Payday loans are like any other unsecured loan and may be included in this payment method so that you can pay them off over time with your creditors. You might even be able to discharge some of these payday loans if there’s evidence that it would put too much pressure on your finances under a hardship provision. For example, when someone cannot complete their payments during an extended repayment period due to economic distress or unemployment, these loans are simply discharged.
Does Bankruptcy Clear Payday Loans?
Most times, filing bankruptcy allows you to discharge either all or part of your pay day loans. In Chapter 7, most people end up discharging the total debt of not only their medical bills and credit card balances but their pay day loans too. However, in Chapter 13, most people only discharge part of their loans.
Payday Lending Practices and Fraud
There are important potential issues to be aware of when filing for bankruptcy after borrowing from a payday loan company. Firstly, taking out a loan while knowing that you’re filing for bankruptcy at some point is a fraudulent act. This is because you cheated the system by using bankruptcy as an excuse to not pay back the loan. Bankruptcy doesn’t allow people to discharge fraudulent debts. If creditors suspect fraud, bankruptcy law allows them to object to your discharge with an adversary proceeding.
Secondly, a pay day loan company often requires a post dated personal check in exchange for cash advances. But this comes with two potential problems. First, if the payday lender cashes post dated checks after you file bankruptcy, they violate the automatic stay protection. Second, the payday lender might accuse you of writing a bad post dated check, then threaten criminal charges.
Can You Get a Payday Loan While in Chapter 13?
During Chapter 13 bankruptcy proceedings, you pledge to make payments on your credit over the next 3 to 5 years. In that period, you must receive bankruptcy court approval before taking out new loans. In short, taking out new loans while in Chapter 13 is very difficult, especially if you encounter financial hardship. You already have to make debt repayments, so adding other loan payments on top of that makes the situation more difficult to manage. In some cases, people get so behind that the court dismisses their case. However, if this happens, it’s possible to refile for Chapter 13 and to list the payday lenders as your creditors.
Can Bankruptcy Help With Payday Loans?
Filing a Chapter 7 bankruptcy case can wipe out debt, including payday loans. Even if the loan company includes a statement that the debt is not dischargeable in bankruptcy, this may be untrue. It should never deter anyone from filing for debt relief to improve their credit score over time. For many people, filing a bankruptcy case gives them freedom from debt they cannot pay. But is it right for you? Talk to a Kentucky bankruptcy attorney before deciding on Chapter 13 or Chapter 7 bankruptcy. A bankruptcy lawyer at our law office can help you decide if this is the best option for you.
How Does Bankruptcy Affect My Payday Loans?
Payday loans are basically unsecured debts that a Chapter 7 bankruptcy hearing can completely wipe out. They often become an unsecured debt when you write a “bad post dated check,” which just means the pay day lender deposited money into your bank account when there wasn’t enough to cover it. This could be due to other transactions on your bank statement or overdraft fees. When a debtor is unable to pay back the loan, he or she can file for Chapter 7 bankruptcy. This will prevent debt collectors from hounding their debtors about repayments while allowing them peace while they repay other debts that aren’t as financially taxing.
Call Chapter 13 Attorneys at O’Bryan Law Offices Today
At O’Bryan Law Offices, we are passionate about giving our clients a fresh start from both secured and unsecured debts through filing bankruptcy. Every single bankruptcy attorney at our law firm prioritizes their attorney-client relationship while protecting all sensitive or confidential information. To discuss how to repay lenders that work with Chapter 13 and all other debt relief issues, call a qualified bankruptcy attorney at 502-339-0222 today.