Can I Include Payday Loans in Bankruptcy?

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Payday loans can be a source of financial distress for consumers. If you find yourself in trouble with payday loans, you may be considering bankruptcy as an option. In most cases, your payday loans can be eliminated through bankruptcy protection, depending on what type of bankruptcy you choose and the laws of your jurisdiction.

Payday Loans

Payday loans are a type of loan that you can get from cash-advance merchants. This type of loan can be secured with a post-dated check in many cases. These loans can be troublesome because of the high fees and interest rates that often come with them. With a typical payday loan, it is not uncommon to pay interest upward of 250 percent annually. If you are late repaying these loans, the late fees can add up to be more than the original amount that you borrowed.

Bankruptcy Discharge

If you get behind on your payday loan payments, you can consider filing for bankruptcy. Filing for bankruptcy can eliminate the legal obligation to repay any unsecured debts, such as credit card debt, medical bills and payday loans. Regardless of what the payday lender told you before, the lender must cease trying to collect the debt from you after you receive your bankruptcy discharge. The collection calls and threats of a lawsuit will stop.

Bankruptcy Types

The type of bankruptcy that you file will also have an impact on this process. With Chapter 7 bankruptcy, your debts will be discharged once the bankruptcy trustee sells any of your assets that are not protected by an exemption and distributes the proceeds to creditors. Bankruptcy exemptions vary by state and allow you to keep certain possessions. With Chapter 13 bankruptcy, you will set up a partial repayment plan that is administered by the bankruptcy trustee. When the repayment plan is complete, usually in three to five years, the remaining debt that you have will be discharged.


If you cannot repay your payday loan, the payday lender has a number of potential solutions to use if you do not file for bankruptcy. The payday lender can hire a collection agency to try to collect the money from you. If that does not work, the payday lender can file a lawsuit against you. If the lender's lawsuit is successful, the court will issue a judgment against you. At that point, the payday lender could have your wages garnished or levy money directly out of your bank accounts.


About the Author

Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.