When it comes to filing bankruptcy, there are so many rules and regulations that it can be difficult to know what is possible and what isn’t possible. One of the easiest ways to find out if you can file bankruptcy is to gather a list of all your debts (including the types of debts they are) and then take them to an experienced bankruptcy attorney. Our attorneys can examine the information and let you know what you will and won’t be able to include in your bankruptcy case. Not only that, but we can also help you figure out which type of bankruptcy is best for your situation and how you should move forward. Payday loans are just one of the many types of financial obligations that people ask questions about when it comes to filing bankruptcy.
What Is a Payday Loan?
Perhaps you are just trying to cover all of your bases and get a solid idea of what is and isn’t covered in a bankruptcy hearing. If so, knowing the definition of a payday loan might be helpful because while they commonly go by this name, there are other names they are known by as well. Some institutions call them check loans or short-term loans. In most cases, they are considered payday loans when you make a payment on each payday. That might be a weekly, biweekly, or monthly payment depending on your employment schedule. These loans go through companies set up for this specific purpose rather than a traditional bank loan. They often involve high interest rates and may even be attached to your checking account so you can make payments straight from your account rather than write a check.
Determining Between Secured and Unsecured Debt
There are two different types of loans: secured and unsecured. Payday loans are unsecured loans, which have no backing or anything to “secure” them. In Chapter 7 bankruptcy cases, secured loans allow the creditor to collect the item, items, or monies that the loan was secured with. In cases of unsecured loans, the debt is discharged with nothing to be given to the creditor under the laws of Chapter 7 bankruptcy.
Under Chapter 13 bankruptcy, unsecured loans such as payday loans can be included in the bankruptcy, but all or some of the debt will be included in the total amount that the petitioner has filed bankruptcy on. This means that it will be paid back, at least in part. Click here for more information about loan debt in bankruptcy.
Payday Loans and Bankruptcy
One of the only advantages of payday loans is the fact that because their interest rates are so high, they may be the very thing that puts you over the top and qualifies you for bankruptcy status. However, these loans are recommended for use only when there is no other option because they cost the borrower so much that they can create financial upheaval all by themselves. Their availability and easy application process have made them popular with people who can’t qualify for other loans, but their high interest rates make them difficult to manage when you are already living within limited means. In many cases, the fees and enormous interest rates that come with payday loans are one of the reasons that consumers aren’t able to gain control of their finances and end up in trouble. Instead of continuing to struggle to make payments and care for your family, bankruptcy may be the best alternative.