Payday loans are like any other unsecured loan in bankruptcy. Instead of signing a promissory note, you give the payday loan company a post-dated check. Some people are afraid that a payday loan cannot be wiped out in bankruptcy because it is like writing a bad check. That is not the case. When you write a check to a grocery store, claiming that there is money in your account to cover it, that is writing a bad check. When you write a check to a payday loan lender, you are not claiming you have money to cover it – quite the opposite. You are saying that you don’t have money now, but you will be able to cover the loan in the future. You will only get in trouble if they can prove you knew you were not going to have money in your account in the future or you were planning on filing bankruptcy when you took out the loan. Even if they somehow suspect fraud, they would have to prove it to get anywhere, which is difficult and expensive – not something a payday loan company is willing to do for a relatively small payday loan, especially considering the bad reputation payday loan companies have.
Payday loan companies often encourage the belief that the payday loan cannot be wiped out in bankruptcy. Don’t listen to them! Payday loans are almost always wiped out in bankruptcy.
You may not want the payday loan to have access to your bank account while you are planning on filing bankruptcy. The automatic stay in bankruptcy will prevent the payday loan company from accessing your account after you file, but you may want to make sure they are prevented from doing so anyway (though they could be sanctioned by the court for even trying). One solution is to open a new bank account. Because banks can check for closed bank accounts before opening a new one, it is better to open a new bank account before you close the old one. Putting a stop payment on a payday loan check is another option, but banks charge a fee for that, and it takes a while.
If you have overwhelming debt–including payday loans, bankruptcy could be the solution you're looking for. Contact the experienced Seattle, WA bankruptcy lawyers at the Law Offices of Jason S. Newcombe today to find out how we can help you get rid of your debts and create a new start.