Bankruptcy, Payday Loans, And You

Posted on: 15 February 2017

For some, a payday loan is just one more sign of a decaying financial situation. If you need some emergency cash and don't have other resources, it may be an option of last resort. You may wonder, however, if you can include that payday loan on the bankruptcy that you're considering filing. It's only natural that you have a good understanding of what can, and what cannot, be included in a chapter 7 bankruptcy filing. After all, what is the point of it if you cannot get rid of most, if not all, of your debt? To learn more about bankruptcy, payday loans and you, read on.

Secured and Unsecured Debt

While the above terms sound a bit technical, a good understanding of what is meant by them is important. Most people have two main types of debt, and bankruptcy treats these two types of debt very differently. You want to pay special attention to unsecured debt, since it is that type that can make a chapter 7 bankruptcy filing so beneficial

Secured debt: If you have property to "back up" the type of debt, it is secured by that property. If you fail to pay as agreed, that property can be taken back and used to repay the debt. Vehicle loans are secured by the vehicle; if you fail to make payments; your vehicle can be repossessed. Mortgage loans are secured by the home; if you fail to make payments your home may be foreclosed upon. These are two of the most common forms of secured debts, but check with your bankruptcy attorney for more possibilities. It's important to note that any secured debt could mean property in danger of being lost. You may loose it by not making payments, but it also may be seized in bankruptcy. A lot depends on how much the property is worth, how much you owe and the total amount of your bankruptcy, so you may be able to keep some property, even if it does fall into the "secured" bucket.

Unsecured Debt: Personal loans and credit cards are the most commonly seen unsecured types of debt. No property is at risk here, and anything you owe to unsecured creditors can be entirely forgiven with a chapter 7 bankruptcy filing. Where does a payday loan fall? Happily, it falls into the unsecured category, may be listed on your bankruptcy petition and may be discharged during bankruptcy.

The Disclaimer

Not so fast, you may be saying. You likely remember signing a document during your payday loan process saying that you understood that this payday loan could not be included on a bankruptcy filing. You should understand that this disclaimer has no bearing on the ability to include the payday loan debt in your bankruptcy. Payday loans are unsecured, plain and simple, and may be fully discharged regardless of anything you may have signed.

Talk to a bankruptcy lawyer, like one from AMS Law Group, for more information.