In recent years an industry known as “Payday Loan” companies have developed to mainly offer small loans from $ 200 to $ 400 usually, and targeting low income individuals who are very vulnerable to any changes in their weekly budget. In other words, these are persons who live paycheck to paycheck and if the slightest problem occurs financially, they are devastated. In comes the payday loan company to the rescue, but at a very heavy price. These loans can have interest rates that calculate into the hundreds of percent. Once they have you hooked, it is very difficult to get out of the trap and as a result individuals end up going to another payday loan company to get money to pay the first company, and so on and so on. Ironically, many of the payday loan companies operate under different names but actually are owned by one company so there is no way to escape.
That is where Bankruptcy can be a tremendous help in breaking this cycle and getting folks back on a sound financial footing. Both Chapter 7 and Chapter 13 can deal with Payday Loans and we actually see them in almost all cases we file. To date, it is rather rare to see representatives of Payday Loan companies at Bankruptcy Court as the industry as a whole is somewhat frowned upon by the Bankruptcy Judges for basically taking advantage of people when they are really down and out financially.This does not mean you could have problems, such as going out and getting a bunch of payday loans on one day and filing Bankruptcy a few days later. The Court would certainly look at this as potential fraud if you had no intention in paying the loans back and simply wanted to take advantage of the money knowing full well that you would be filing Bankruptcy. But, for the honest debtor, Payday Loans are something you need not worry about when filing Bankruptcy and you simply list them along with your other creditors and your Bankruptcy filing will take care of them depending on the Chapter you file.
Please give us a call if you have any questions about Payday Loans. My best advice, do not take out Payday Loans.