The question can payday loans be added to bankruptcy is a complicated one to answer, as a lot depends on when you took out the loan, how your particular lender operates and the judge presiding over your bankruptcy.
Payday loans are a type of loan that’s not like traditional loans you might get from a bank or credit union. They’re nothing like a mortgage or even a car loan that’s financed through a car dealership. Payday loans are a bit of a special animal in the lending world, as interest rates for these loans are quite a bit higher than traditional loans because lenders don’t require credit checks to approve the loans so they take on more risk.
Can payday loans be added to bankruptcy if that happens? Yes, and no. Fortunately, the ‘yes’ is coming much more often than the ‘no’ these days, when it’s appropriate. To explain the reasons behind both answers, look at two examples.
In example 1, a person takes out a payday loan not fully understanding the potential financial disaster that can result from it. The person misses the payments and the high interest rate causes it to multiply more rapidly than he can keep up with. Through several months of struggling to keep payments up, it becomes too much and the person defaults on the payday loan. The person’s finances overall are in such a state that several months to over a year (or longer) after taking out the payday loan, he files bankruptcy.
n example 2, a person decides to take out a payday loan and files bankruptcy within just a few months of the loan.
In both cases, the finances were probably in trouble before the loan, because payday loans are generally used by people with few other options. So the credit was not great going into the loan. The question can payday loans be added to bankruptcy for example 2 when the loan was taken out right before the bankruptcy would probably be answered with a no. Because of the short amount of time, that payday loan might not quality for the bankruptcy.
In example 1, because of the way that payday loans operate, which is being challenge on the state and national level by government attorneys right now, technically the loan probably has a renewal date of only 30 days or less before the bankruptcy. That’s because these loans renew every 30 days, so a judge could rule it out of the bankruptcy based on that.
Fortunately, when you wonder can payday loans be added to bankruptcy, judges regularly do include those longer-term loans despite the renewal date, because of the nature of the industry. Many judges automatically include them because they know that these types of loans are often the breaking point for someone on the verge of bankruptcy. So unless the loan was taken out too recently, the answer to “can payday loans be added to bankruptcy” is usually less, unless the judge refuses to look at the big picture.
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Tags: Bankruptcy, Cash, Cash Loans, Finances, Loans, Payday Advance
Finding ways to avoid bankruptcy is always a good thing. Filing bankruptcy can mean higher interest rates and bad credit terms for many years to follow, not to mention the tough time trying to get approved for credit. It’s nice that people can add payday loans to their bankruptcy and it should be the case since a person who is filing bankruptcy can’t pay back their loans, including these short term loans.
Unless there is obvious ‘proof’ that the payday loan was taken out with the intent of defaulting and defrauding or depriving the payday loan provider of repayment of principal and/or interest through the bankruptcy proceeding they probably should be rolled into the liabilities included in the bankruptcy.
Unfortunately, with the way the economy has been going, both payday loans and bankruptcy lawyers look like they are sitting on growth industries. So, this question is bound to be more common in the future.
payday loans is really touch. Its better not to take any loan.
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I don’t know how these payday loan sharks sleep at night. Unfortunately, we have to take the good with the bad in free enterprise. However, consumers retain the right to avoid these predatory businesses. The concept of supply and demand must carry the day with shams like payday loans and credit repair. If and when people refuse to be fleeced by these people, their operations will go away.
Very true statement. People have a choice and there are many people that are fueling the industry and making it more lucrative to be apart of it. When companies like Wal-mart decide to get into the business you know that it has hit its stride.