If you are in a bind for money, there may not be many places to turn. Friends and relatives may not be able to help when your car needs repair, or a medical bill is unexpectedly high. A payday loan could be just the remedy for your lack of cash. They are quick and pretty easy to get and allow you take care of business. The problem is that these loans can have punitive interest rates and fees, particularly when you cannot make good on the installments due on your next payday.
If your financial problems have gotten worse since you took out the loan, you may now be considering a bankruptcy. You may believe that a bankruptcy filing is the right move to make even though you may not be able to include that payday loan. Read for a better understanding of how payday loans work for those going through a bankruptcy.
What kind of debt does bankruptcy handle?
- Tax debts
- Student loan debts
- Back child support debts
- Some debts from past court rulings and the court fees associated with them
What to know about payday loan debt
If you think back to the day you signed the paperwork for that payday loan, you may remember a document having to do with bankruptcy. Among your paperwork, you might find a statement instructing you that a payday loan cannot be listed on a bankruptcy filing and that you must continue to make good on any payday loan regardless of a bankruptcy filing. Lucky for you, this document is not worth the paper it's printed on.
Payday loans are unsecured debt
There are two types of bankruptcy debt, secure and unsecured. Both can be part of a bankruptcy case but the secure debts are associated with the property, and you might be at risk of losing property in some cases. A mortgage and a car loan are two common debts that are considered secure.
Payday loans, along with credit card debt and personal loans or signature loans are unsecured debts. That means that if you fail to pay as agreed no property is at risk. That also means that payday loans can and should be listed on your bankruptcy forms. Failure to do so could result in a continuation of the debt, which is what the payday loan industry wants.
Speak with a bankruptcy attorney to learn more.