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Payday loan and bankruptcy advice
Question: Can a payday loan be filed in bankruptcy?
Answer: These small loans, also called cash advance loans, check advance loans, or deferred deposit check loans, are a frequent pitfall for consumers. A fee anywhere from $15-$30 per $100 borrowed is charged for an average loan of $300. With rates so high and the term of the loan so short it is no wonder that a very high percentageof these loans are rolled over by the borrower again and again so that the accumulated fees equal an effective annualized interest rate of 390% to 780% APR depending on the number of times the principal is rolled over. Bankruptcy may be able to help you if you have found yourself overwhelmed by excessive payday loans or other debts, but you will need to consult with an attorney in your area to determine whether or not bankruptcy is the right choice for you, and which type of bankruptcy will help you the most.
There are two basic types of consumer bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, also called a liquidation bankruptcy, a bankruptcy trustee will examine your assets, and if you have any assets which are not exempt, sell those non-exempt assets to repay your creditors. Once your non-exempt assets have been sold to pay your creditors, all remaining unsecured debts will be discharged by the bankruptcy court. Generally speaking, payday
loans can be discharged in Chapter 7 bankruptcy, along with most other unsecured debts. However, your ability to qualify for Chapter 7 will depend on your income, your assets, and the laws in your state of residence. Many people who file for Chapter 7 protection are able to keep all of their property because they have no non-exempt property. Each state has its own schedule of exempt assets, so you should consult with a qualified bankruptcy attorney in your state to find out if Chapter 7 is a workable solution for your situation. An attorney will also be able to tell you if you qualify to file Chapter 7 under the new guidelines enacted by Congress in 2005.
A Chapter 13 bankruptcy, also called a wage-earner?s bankruptcy, allows you to propose a plan to repay creditors over time?usually five years. Your monthly payment amount will be based on your monthly disposable income as defined by the bankruptcy code. After you have made payments to your creditors for five
years, any remaining unsecured debts will be discharged. Again, you should be able to include your payday loans in a Chapter 13 reorganization plan. Chapter 13 is commonly used by debtors whose assets exceed the exemptions offered by state or federal law. It is also used by many consumers who do not qualify for Chapter 7 relief under the means test, which went into effect in 2005 with the Bankruptcy Reform Act.
Again, if you are considering filing bankruptcy, you should consult with an attorney to find out if bankruptcy will benefit your financial situation. I encourage you to read more about bankruptcy at the Bills.com Bankruptcy Information page at http://www.bills.com/bankruptcy/
I hope you will be able to resolve your payday loans and other financial problems, and I hope the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Sheila on Wednesday 2nd January 2008 07:32
Hi, I have 7 ONLINE PAYDAY LOANS that I am currently paying, because of this I am behind in several of my bills especially my rent. This is the reason I keep taking the payday loans out to pay off a bill? Is there anyway I can get these companies to reduce my interest or fees? Or is there a company that will consolidate by debt so that I will have one affordable bill a month for all my payday loans? Thank you for your help
2. Posted by nate on Wednesday 2nd January 2008 11:20
You may be in luck in regard to your difficulty in repaying these loans. There are eight states whose payday loan regulating statutes require lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers allowed by law and the debtor declares that he/she is unable to pay the balance due. Check out the payday loan information from the Consumer Federation of America at http://www.paydayloaninfo.org where you will be able to read all about these loans and the various state attempts to regulate them. Follow the “state information” link to find out the specific regulations for payday lenders in your state, and if you live in one of the eight states requiring installment payments. If your state does require repayment plans, and the lender still won’t accept payments, call your state regulator of payday loans, usually an assistant Attorney General, and complain. You should get the results you want after the Attorney General’s office becomes involved. If you are not in one of those states, you may want to consider simply making payments to the lender of whatever you can afford to pay down the balance of the loan over time. In most states, the rollover limit will soon be reached, and the interest rate the lender can charge will be capped by state law. If the lender will not accept your payments, simply put what you can afford aside each month until you have enough money to either pay off the loan or to offer a settlement. Read up on the regulations in your state to find the best strategy for your situation.