Bankruptcy can help borrowers deal with overwhelming payday loan debt, but it may not be able to completely discharge this debt. This is why those considering bankruptcy due to such debt should consult with a bankruptcy attorney to learn more about their options in Chapter 7 and Chapter 13 bankruptcy.
Payday loans are a popular way to get a quick infusion of cash when you need money quickly. Unfortunately, the high interest rates and short repayment terms can make it difficult to pay back these loans, leading to mounting debt for many borrowers.
If you're struggling to keep up with your payday loan payments, you may be wondering if bankruptcy is an option for getting rid of this debt. In this post, we'll explore the relationship between bankruptcy and payday loans to help you understand whether filing for bankruptcy is the right choice for you.
Chapter 7 May Not Be the Direct Solution to Payday Loan Debt
Those who experience financial hardship are most likely to take out payday loans, which means they may soon file for bankruptcy. While Chapter 7 bankruptcy can provide a significant amount of debt relief, not all debts are dischargeable. Among these nondischargeable debts is any debt greater than $600 acquired within a 70-90 day period before filing for bankruptcy. Attempting to discharge such debt is considered presumptively fraudulent, and the courts will dismiss these cases.
Because of this, bankruptcy may not be the direct solution to payday loan debt. That said, Chapter 7 can help in a roundabout way. If you owe a considerable amount of unsecured debt that’s making it difficult to prioritize payday loan debt, a Chapter 7 discharge can help you free up your income to focus on paying back your payday loan.
Chapter 13 Can Help You Reorganize Your Debt
If Chapter 7 isn’t the best way for you to deal with your debt, you may qualify to reorganize your debt in Chapter 13 bankruptcy. This type of bankruptcy consolidates your debt into an installment plan that lasts about three to five years.
During this period, you pay a fixed monthly amount according to the payment plan. As long as you can keep up with these payments, you can complete Chapter 13 and satisfy your debt obligations. This type of bankruptcy is especially helpful to those struggling with secured debt and don’t want to lose the collateral attached to the debt.
Contact a Lawyer for Legal Assistance
Dealing with payday loan debt can be stressful and overwhelming, especially if you're struggling to keep up with payments and facing mounting interest charges. While bankruptcy may be an option for getting rid of payday loan debt, it's important to understand that not all payday loans can be discharged through bankruptcy, but bankruptcy can free up your financial obligations to help you put a greater focus on paying off other debt.
If you want to explore the legal options that may be available to you, reach out to Buchalter & Pelphrey Attorneys At Law and request a consultation.