HOW DOES BANKRUPTCY HELP ME WITH PAY DAY LOANS?
Bankruptcy can stop most pay day or check cashing loans. Some lenders will tell you anything to get you to pay their loan back. Do not borrow money from payday lenders to pay for your bankruptcy! If you borrow money within 70 to 90 days of filing bankruptcy, it may not be discharged!
In a Chapter 7, bankruptcy you can discharge the debt to a payday lender so long as there was no fraud involved. Fraud means, you took out the loan and lied on the application or did not intend to make the repayment. Most clients take out the loan and want to pay it back but an emergency happens and they are not able to repay—examples, you lost your job or got sick and were out of work.
In Chapter 13 Bankruptcy, you would pay the loan back with the unsecured debt. So the payday lender would receive anywhere from 1% to 100% back on their loan. They would not receive their 200% to 400% interest on the loan.
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