Will Filing Bankruptcy Wipe Out Payday Loans?

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There isn’t really a straight answer to that question. Generally speaking, yes, payday loans can be wiped out by filing bankruptcy.

A payday loan will be viewed very similarly to credit card debt. Therefore, it can be wiped out through a Chapter 7 bankruptcy or mostly wiped out in a Chapter 13 bankruptcy. The key thing to look at is when the payday loan was received.

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Like credit card debt, or any other debt, if you received the loan within the last 90 days there will be a presumption of abuse, or fraud, by the courts. If a debt is incurred and viewed as fraudulent then the debtor is required to pay back that debt in full. Therefore, it is important to wait at least 90 days before filing a bankruptcy after receiving a payday loan. You may need to wait even longer depending upon the amount of the payday loan.

A common tactic that payday loan companies will use is to have the person seeking the loan write a post-dated check for a certain amount. They do this so that if a person doesn’t pay the loan back they can attempt to cash the check and there will be non-sufficient funds available. The payday loan company can then try to argue that you wrote them a bad check and they could attempt to press criminal charges against you. However, it is rare they will actually attempt to do that. One of the major reasons is because a check is only considered “bad” if the person writing the check gives the impression suitable funds are in the bank to cover the check. The fact that you are post dating a check and doing so to a payday loan company makes it pretty clear you aren’t communicating that you have sufficient funds.

Once the bankruptcy is filed an automatic stay is in place that protects the payday loan companies from trying to collect on any money owed to them. However, they could attempt to press criminal charges for writing bad checks. As explained above, the chances of that are slim to none but you will want to make sure to consult with your bankruptcy attorney.

The bottom line is, payday loans may be wiped out or lessened by filing for bankruptcy but consult with a Charlotte, NC bankruptcy attorney or Greensboro, NC bankruptcy attorney to make sure you file the bankruptcy at the right time.

2 replies
  1. Mike Washington
    Mike Washington says:

    If I incurred a debt but paid it off and then reborrowed that same day, does the 90 day window start over? Or do they look at when I first incurred the debt?

    • Damon Duncan
      Damon Duncan says:

      Mike,

      Typically they look at when the new debt was incurred, not the original debt. However, that doesn’t mean you MUST wait the 90 days. I would encourage you to contact an experienced bankruptcy lawyer because they can look at your situation as a whole and let you know whether waiting is necessary or not. It really depends on what you did with the money, etc.

      Thanks for asking the question and best of luck to you!

      Duncan Law Team

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