Payday loans have a poor reputation, but for those in desperate financial circumstances, getting one could be a real lifesaver. These loans often come with a need to refinance upon the due date, leading to punishing interest charges and fees. If you are in need of a payday loan to help ends meet, you may also be considering filing for Chapter 7 bankruptcy. There are few more quick and efficient ways to make a fresh financial start than through the debt relief that a Chapter 7 filing could bring. If you find yourself considering filing for bankruptcy and also have an outstanding payday loan, read on for information that could help you include as much debt as possible on your bankruptcy petition.
Debts that can be forgiven with a Chapter 7 bankruptcy filing.
It's important to understand how bankruptcy treats the two main types debts, secured and unsecured. Loans and debt that include property are secured debt. For example, a mortgage loan normally includes the home itself as collateral for the debt. If the borrower fails to pay the mortgage payments, the home could be foreclosed on and seized by the lender. Vehicle loans are similarly secured debts.
While all debts must be included on a Chapter 7 filing, secured debts are handled differently. You are far more likely to lose property associated with a secure debt, depending on how much the property is worth and how much you owe on it. Unsecured debt, however, has no property backing it up. Most personal (or "signature") loans and credit-card debts fall into this category, and it is the opportunity to have those unsecured debts disappear that makes declaring bankruptcy so attractive.
Payday loans in bankruptcy
Each time you "refinance" your payday loan, you are likely to sign a large package of accompanying paperwork. Among that paperwork is a bankruptcy disclosure, which states that you agree to continue paying the payday loan even if you declare bankruptcy and that payday loans should not be included in your bankruptcy creditor matrix. You should know that this disclaimer has no meaning; it is simply a ploy on the part of the loan store to get you to leave this debt off your bankruptcy petition. Don't fall for it! Any debts not included on your petition have no chance of being forgiven. Payday loans are unsecured debts, just like your credit cards, and may be forgiven through a chapter 7 filing. You may need to show that the debt was incurred for a non-frivolous reason, especially if the payday loan was initially opened right before you declared bankruptcy.
To learn more about how payday loans are handled with a bankruptcy filing, consult with your bankruptcy attorney.
