Payday Loans and Bankruptcy

For many people living paycheck to paycheck, payday loans can be a convenient way to close the gap if you’re coming up short on money at the end of the month. The trouble is, payday loans can pile up quickly. With high interest rates on these loans, it can be hard to find a way out of your payday loan debt.

While payday loans may seem like a good means of alleviating financial challenges, they can actually compound the issue. Luckily, bankruptcy can help you find a path towards financial freedom.

At H. Lehman Franklin, P.C., we are a debt relief agency. We help people file for bankruptcy relief under the bankruptcy code. We provide federal debt restructuring help.  Just let us show you how we can guide your towards finding a way out of your payday loan debt today.

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What is a Payday Loan?

While the definition of a payday loan isn’t always clear, they can generally be understood as short-term loans with high interest rates, often for $500 or less. This money is typically due on your next payday and may be used to cover basic living expenses if you need money now and can’t wait.

Many payday lenders will have you authorize an electronic debit of the payoff amount as a way of ensuring you can later pay off the loan.

Why File for Bankruptcy?

If you’re overwhelmed by your debt, you don’t have to struggle. Bankruptcy is a way for you to gain control of your finances again.

By filing for bankruptcy, you’ll have a fresh start on your finances, giving you an opportunity to achieve financial independence and live life free of the stress of debt.

If you seek legal assistance to deal with your debt, you’ll have our lawyers in your corner to look out for you. We’ll advocate for you to ensure you aren’t manipulated while you’re trying to find the path out of debt.

Can I Discharge My Payday Loans Through Bankruptcy?

The important thing to note about payday loans is that they are “unsecured debt.” This means that unlike “secured debt,” the debt doesn’t have an asset attached to it that can be used as collateral. In most cases, you can discharge unsecured debt, but it largely depends on the bankruptcy chapter you choose to file under.

The main bankruptcy chapters are:

  • Chapter 13 Bankruptcy is for people who have a steady income and want to pay off their debt in manageable chunks over time.
  • Chapter 7 Bankruptcy is for people who can’t currently pay off their debt but may be willing to liquidate some of their assets, although liquidation does not often occur.
  • Chapter 11 Bankruptcy is for businesses and consumer debtors with lots of assets to consider. There are special provisions for individuals or corporations that qualify as small business debtors, which can make the Chapter 11 process quicker and easier.
  • Chapter 12 Bankruptcy is a unique type of bankruptcy for family farmers and fishermen.

The two main bankruptcy chapters you’re likely to consider for payday loans will be Chapter 7 and Chapter 13.

Chapter 7 bankruptcy will often allow you to discharge your debt approximately six months after bankruptcy has been filed. With Chapter 13 though, you’ll instead restructure the debt to pay it off over three to five years, which is often more suitable for wage-earning debtors, especially if you have other secured debts such as a vehicle payment that you may wish to restructure or mortgage payments to catch up on.

During the Chapter 13 case, how much you pay to unsecured debts depends on your individual circumstances.  In many cases, debtors pay little or nothing to unsecured debts, and at the end of the case, most unsecured debts are discharged. You no longer have legal liability for debt once it is discharged.

A Respite from Payday Loan Collections

If you have persistent payday loan debt, a common issue many people have is dealing with collections agencies contacting them. Once you file for bankruptcy, in most cases collections agencies can no longer contact you looking for repayment. Make sure to stand for your rights if collections agents attempt to manipulate you during the bankruptcy filing process.

Another common way that lenders seek to avoid debt being discharged is through disclaimers in their paperwork. It’s not uncommon to see disclaimers that state that the debt cannot be discharged through bankruptcy. These types of provisions often are unenforceable in bankruptcy court, so this should not hold you back from seeking debt relief through bankruptcy.  You should consult with an experienced attorney to discuss whether or not a payday loan will be discharged.

Schedule a Free Consultation with Us

If you’re finding it hard to stay afloat among payday loan debt, our lawyers at H. Lehman Franklin, P.C., are here for you. With over 30 years of experience, we’ve helped many Georgia residents find the relief they need through bankruptcy.

To get started on the path toward financial freedom, just schedule a free consultation with us to see if we can take your case today!