Pay Day Loans
Pay day loans are debts that are backed up by checks people write to a lender for a future date. They are unsecured debt just like medical bills or credit cards. You can discharge pay day loans if they have gone to collection or you are continually rolling them over. If you just took out a pay day loan, you can discharge it as long as you intended to pay it back when you took it out. For a pay day loan to be excepted from your bankruptcy, the pay day loan company would have to prove you committed fraud – either you took out the loan planning to discharge it in bankruptcy or you falsified a credit application. Fraud cases are complicated and expensive. The amounts in pay day loans are usually so small it’s not worth filing a fraud case in bankruptcy court over but it’s possible.
Pay day loan companies tell their customers the debt can’t be discharged in bankruptcy sometimes. This is not true. Any contract that waives a persons right to discharge a debt in bankruptcy is not enforceable. The pay day loan, interest, collection costs, lawyers fees and late charges can all be discharged in bankruptcy.
You may want to close a bank account with pay day loan checks written on it before you file bankruptcy. You could put a stop payment on the check but it takes a while for banks to process stop payments and there are charges involved. If you have pay day loans outstanding and you are thinking of filing bankruptcy, you should close these bank accounts and open new accounts in plenty of time before you file your case.