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.
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.
Can I Have Too Much Debt to File Bankruptcy?
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In terms of a Chapter 7 bankruptcy you cannot have too much debt to qualify. There is no minimum debt amount to be eligible to file for a Chapter 7. However, since a person can only file a Chapter 7 bankruptcy once every 8 years, it is important to determine that the time that you file your bankruptcy that your debt is absolutely too much for you to pay back.
For a Chapter 13 bankruptcy there are some limits in regards to having too much debt. A person can have no more than $360,475 of unsecured debt, which an example of unsecured debt would be credit cards and/or medical bills and no more than $1,081,400 in secured debt. The best examples of secured debts would be a house or car. The restrictions for a chapter 13 bankruptcy are based upon the time constraints that a person will actually be in bankruptcy. A person is required to pay back a portion of their debts within 60 months while in a Chapter 13 bankruptcy and this time frame helps determine the amounts that you will be paying each month to the trustee.
Therefore, you cannot have too much debt to file a Chapter 7 bankruptcy but you may have too much debt to file a Chapter 13 bankruptcy. If you are unable to file a Chapter 13 bankruptcy then you could always file a Chapter 7 instead.
How Do I Pay for a Bankruptcy Lawyer if I’m Bankrupt?
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Understandably, this is one of the most common questions we get and it’s a good one! With the economy being in such a downturn, this is often one of the first questions asked, and for many, it’s the most important. “If I can’t pay my bills, how can I afford to pay you?” Simply put, many firms, along with ours, allow you to set up your own easy payment plan. You choose the amount that you wish to pay and you pay at your own pace, making a difficult time less stressful and more convenient for you. Also keep in mind, once you’ve met with an attorney and have made the decision to file bankruptcy, you may be able to stop making payments on most of your unsecured debt like credit cards, some personal loans and medical bills. By not making these payments it will free up some of your income which can then be used to help pay for your bankruptcy fees.
Depending on where you file, the Court may require that your attorney fees be paid in full before your bankruptcy can be filed. The reasoning makes some sense. The courts look at it as your attorney is the person who is supposed to help you wipe out your debts. However, if the attorney isn’t paid up front – then you will owe them as well. Their motivation to help you wipe out your debts is probably gone when it means the attorney wouldn’t be paid. Therefore, the courts have said that the attorneys fees in Chapter 7 bankruptcies must be paid before the case is filed.
On the other hand, if you are having to file a Chapter 13 bankruptcy the courts will allow the attorneys to collect only a portion of the fees and have the remainder of the attorneys fees paid in the Chapter 13 bankruptcy plan. This will help lower the initial burden of trying paying all of the fees up front.
It is important to remember that even though a payment plan may be available to you allowing you to pay at your own pace, some individuals may be facing other deadlines. Each individual bankruptcy is different. There may be certain circumstances that prevent you from taking your time to pay (and file). If you have a foreclosure sale date, a pending repossession, or a pending judgment/writ of execution, you most likely will not have the extra time to leisurely pay. You may have no choice but to get your bankruptcy filed before a specific deadline, and in that case, you will have to pay in full in order to enact the bankruptcy stay so it protects you and your assets.
Does Filing for Bankruptcy Lower My House or Car Payment?
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Depending on which bankruptcy you file, bankruptcy may lower your monthly payments for a car but will not lower your payments for a house. A Chapter 7 bankruptcy will not lower your monthly payments but you will be wiping out all of your other debts and will no longer be charged interest and late fees on those payments. Therefore, you free up more money each month which helps your ability to make your car or house payments each month. If you still feel like there is no way that you would be able to afford to make the payment each month, then you can surrender your vehicle or house and wipe out any mortgage or car loan that is left over.
In a Chapter 7 bankruptcy, once you file, your secured creditors will want you to sign what’s known as a reaffirmation agreement. A reaffirmation agreement tells that creditor that you will continue to make your payments as contracted. In a Chapter 7 bankruptcy, you are not required to sign a reaffirmation agreement on your home, but you must sign one in order to retain your vehicle. In either case, you must continue to make your monthly payments, and upon default, they have the right to foreclose or repossess the property. Now, there are some cases in which you can redeem your car instead of reaffirming it, but you will need to discuss this with your attorney.
In a Chapter 13 bankruptcy, the trustee will be making your house and vehicle payment through the bankruptcy plan. As with a Chapter 7 bankruptcy, your mortgage payment will be the same as it was before you filed the bankruptcy. There is no way to “get around” this unless you refinance your home, in which you will need to obtain permission from the court to do so once you have filed the bankruptcy. If your vehicle is over 910 days (2 ½ years) before the date that you filed the bankruptcy, you may be able to do what’s known as a “cramdown”. If your loan balance is higher than what your vehicle is worth (the court will usually determine the value based upon NADA), then you can pay back the vehicle based upon what it is worth rather than the contracted loan balance. This option is only available in a Chapter 13 bankruptcy though. If it was purchased within the 2 ½ years before you filed, you will pay back the amount that is contracted in your Chapter 13 plan.
Therefore, bankruptcy may lower your car payment through a “cramdown”. However, it you will not be able to lower your monthly house payment through a bankruptcy. If you are behind on your house payment you could potentially file a Chapter 13 bankruptcy which will help you pay back the arrearages, or amount owed, but it will not actually lower your mortgage payment.
What Types of Debts Cannot Be Wiped Out in Bankruptcy?
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Whether filing for a Chapter 7 bankruptcy or Chapter 13 bankruptcy, there are certain debts that you may not discharge when filing your petition. These debts include the following:
Federal taxes and state taxes are typically not wiped out in bankruptcy. Any type of lien issued by the government is not eligible to be discharged through the bankruptcy. We will include your debt in the bankruptcy petition so that the State of Federal authority will be notified of your filing. It is your responsibility to contact the IRS or State to make payment arrangement. If you fail to pay your current tax bill or repay your back taxes, the State or IRS would likely put a lien on your home or another asset that you own. However, there are certain times where taxes may be wiped out. However, it is very rare that you will be able to have taxes wiped out.
Government loans such as federal student loans cannot be discharged through bankruptcy and must be paid back, in full, to the agency that issued the loan.
Court ordered domestic support obligations may supersede the Bankruptcy filing. For instance, if you have a court ordered child support or alimony payment already in place with the Court, this payment is not a viable debt to be discharged in bankruptcy. If you fail to make these payments, the Court may garnish your wages in order to collect the debt.
Any debts incurred AFTER you have filed your bankruptcy petition may not be wiped out. You may not incur additional debt and then contact your attorney requesting that the debt be added to your bankruptcy filing. This is fraud and could result in further legal action.
Debts incurred within ninety (90) days of filing your petition are closely scrutinized by the Bankruptcy court and may not be eligible for discharge with your Bankruptcy filing if they are deemed to be fraudulent. If you go out and purchase items on a credit card, knowing that you were then going to file bankruptcy, the debts will not be wiped out.
Can My Chapter 13 Bankruptcy Payment Change?
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The bankruptcy law allows Chapter 13 bankruptcies to last anywhere from three to five years. If you are required to file a Chapter 13 bankruptcy because you do not pass the Means Test, then your Chapter 13 repayment plan is required to be for 60 months, unless you can afford to repay 100% of your unsecured debt in less than 60 months.
Often, Chapter 13 bankruptcy debtors are apprehensive of their Chapter 13 payment for fear that over the course of three to five years, their job situation may change. It is common for people to ask, “Will my Chapter 13 payment change during my bankruptcy?”
There are two ways to answer this question:
1) Whether your Chapter 13 payment will increase during your bankruptcy, and
2) Whether your Chapter 13 payment will decrease during your bankruptcy.
First, let’s discuss whether your Chapter 13 payment will increase during your bankruptcy. The bankruptcy Trustee has the ability to examine your pay stubs, bank statements, and tax returns at any time during your bankruptcy. Usually, the Trustee will do a review of your case annually. If, for example, you receive a major pay increase during your bankruptcy, the Trustee may increase your plan payments to reflect your new income. Sometimes, your Chapter 13 payment is arbitrarily increased by the Trustee to ensure that enough money is being paid for the Trustee to pay all of your secured debts (house, car, furniture, etc).
Now let’s discuss whether your Chapter 13 payment will decrease during your bankruptcy. If your pay decreases significantly, it is sometimes possible to file a motion with the court to modify your plan payments. Your attorney will be able to discuss your options with you if you suffer a job loss or a major pay decrease. Whether a plan payment can be decreased depends on the specific facts of the case – for example, how much debt is owed, how much is owed to secured creditors, how much is owed in taxes, etc.
The bottom line is that you are usually not locked into your Chapter 13 payment – if your income significantly increases or decreases, there is a chance that your Chapter 13 payment can or will be modified to reflect the change in income. However, you will need to speak with your bankruptcy attorney about the specifics of your case.
What If I Stop Receiving Mortgage or Car Statements After Filing for Bankruptcy?
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Once you file a bankruptcy, an automatic stay goes into effect. This automatic stay states that no creditor can try to collect any debt from you; according to statute 11 U.S.C § 362 (6), “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title”. If a creditor does contact you with payment demands, a Charlotte bankruptcy lawyer or Greensboro bankruptcy lawyer can file what’s known as a “motion for sanctions” which reprimands the creditors attempting to collect the debt.
Even though you are current, and are going to keep your house or car; many creditors will still not send you a bill once you have filed the bankruptcy. Ever heard the phrase, “better safe than sorry”? Well, this is exactly why you are not receiving your statements now; they do not in any way want to violate the automatic stay. If you had set up automatic bill pay, this will likely stop as well. You just have to remember regardless of whether you receive a bill, you must continue to make your house or car payment! If not, the creditors have the legal right to foreclose on your home or repossess your vehicle.
What can you do? Simply call them and request that they still continue to send you your statements. They may send something to your bankruptcy attorney asking for he/she to sign off to give permission for you to resume receiving statements for their records, but in most cases, it is as simple as that. Again, the main reason a creditor stops sending you statements is because they do not want those statements to be viewed as an effort to collect a debt which would violate the automatic stay that goes into effect when your bankruptcy is filed.
