You may already know that Chapter 7 bankruptcy can eliminate your past-due medical bills and credit card balances. But what about payday loans? Can filing a claim provide you with relief from this type of debt?
The short answer is yes, bankruptcy can enable you to get free from the burden of having to pay back a payday lender. However, due to the challenges you may face in getting a payday loan discharged, you may want to have an experienced Utah bankruptcy attorney on your side.
How Payday Loans are Treated in Chapter 7 Bankruptcy
Like unpaid utility bills, medical bills, credit card debt and personal loans, payday loans are considered to be non-priority, unsecured debts in bankruptcy – and the U.S. Bankruptcy Code doesn’t give payday lenders any special treatment.
Almost all unsecured debts that are not priority claims are dischargeable through Chapter 7 bankruptcy. However, just because a debt can be wiped out doesn’t mean that will happen automatically.
Potential Challenges in Discharging Payday Loan Debt
Your payday lender can object to the discharge of your debt. They may argue that the loan was acquired within the last 60 – 90 days prior to your bankruptcy filing – and under the law, recently accrued debts aren’t dischargeable.
This may technically be true, as payday loans are typically set to renew every month when not paid. And while the Utah bankruptcy courts frequently favor debtors in this situation, looking to the original loan date instead of the most recent renewal, that isn’t guaranteed to happen.
Another problem? Chances are, your payday lender required you to provide a post-dated personal check in order to get the loan – and they could try to cash it before your bankruptcy hearing.
Once informed about your bankruptcy case, lenders are generally prohibited from taking any funds. Therefore, the courts may demand that the money be returned. But you may be on the hook for overdraft fees, and you might find yourself without cash for other needs.
Filing for Bankruptcy to Get Relief from Your Payday Loans
For many people, bankruptcy is the best option, a means to get out from under overwhelming debt. And sometimes, filing a Chapter 7 claim is the only way a debtor can end their obligation to a predatory payday lender.
However, Chapter 7 bankruptcy isn’t right for everyone. If you’re deeply in debt, don’t make any decisions without advice from an experienced Utah bankruptcy attorney. Most – including the professional team at the Law Office of Davis & Jones, P.C. – offer free, no-obligation consultations. You have nothing to lose by meeting with a bankruptcy lawyer, and you’ll come away with the information you need to make the best choice for a brighter financial future.
Are you ready to get relief from your payday loan? For expert legal advice, make an appointment with a Utah bankruptcy lawyer you can trust – contact the Law Office of Davis & Jones in Salt Lake City today.