Consolidate cash debts into One Low Payment A bonus: The program will help bundle your loans into a lump sum, advance one new low payment and help you pay them off quickly. The fact is that a post-dated check basically takes the place of a promissory note. Recent federal law caps the interest rates they can charge military personnel. Your bankruptcy attorney can explain these and other options to you in full.
Bank withdrawals and collection calls
Payday lenders that challenge the discharge of payday loan debt are often unsuccessful in bankruptcy court. This is because many bankruptcy courts do not look favorably upon payday lending practices and require the payday lender to prove that you acted with fraudulent intent. Payday loans do present some potential hazards in a bankruptcy filing, however. These hazards arise from the peculiar qualities of payday loans described above: the provision of post-dated checks, location of the creditors involved, and the quick turnaround time required contractually for repayment of the loans. Since your comment here is about my payday loan article, I assume you read it and know that your payday loans would be treated just as any other unsecured debts (like credit cards) and would be discharged (eliminated) in your bankruptcy and that you will not go to jail because of that debt.
1. AUTOMATIC STAYS WON’T ALWAYS BE ENOUGH TO STOP COLLECTION ON PAY DAY LOANS
The US Bankruptcy Code breaks down different types of debt into several classifications and treats each classification differently. Unsecured debt debt with no collateral securing it is divided into priority and non-priority classifications. Examples of this type of debt are child support payment deficiencies, recent tax debt, recent wages owed to former employees, and so forth. Payday loans are, like all non-priority unsecured debt, totally dischargeable in bankruptcy.
Payday loans do present some potential hazards in a bankruptcy filing, however. These hazards arise from the peculiar qualities of payday loans described above: Location of Payday Lenders presents the first challenge in a bankruptcy. Upon filing of a bankruptcy petition, all creditors are noticed of the bankruptcy filing by the Bankruptcy Court.
In order to ensure that this actually happens and that the creditor is noticed of the filing, you must include the name and address among other information in your bankruptcy petition.
If you do not include the correct address, the creditor will not be properly noticed and will have a defense to actions your bankruptcy lawyer may take if they continue to harass you for collections after the filing. Recent federal law caps the interest rates they can charge military personnel. Many states specifically regulate payday lenders; some outlaw them altogether. Others regulate interest rates, or have general regulations regarding taking a post-dated check, and the length of time a check can be held.
But in states where such loans are legal, and largely unregulated, like South Carolina payday lenders are thriving, and they are an issue in many bankruptcy cases. The fact is that a post-dated check basically takes the place of a promissory note. Many of my clients, however, worry that they will be arrested for passing a bad check, and many payday lenders encourage that belief. But writing a post-dated check to a payday lender is different from passing a bad check at the grocery store.
When you go pay for goods or services with a check, you are representing that there are funds in the bank to pay the check. When you go to a payday lender, there is no such representation. In fact, the opposite is true. I have learned to ask prospective clients specifically about payday loans. Many people seem to assume that bankruptcy will not resolve such loans. You should advise your bankruptcy lawyer about those loans, and discuss how to handle them.
However, in the event that the borrower declares bankruptcy, Pay Day loan companies may have the legal right to attempt to cash any post-dated checks submitted to them. Though the Pay Day loan company may have some rights to cash the check, there are also solutions. Your bankruptcy lawyer can carefully assess your case to decide which is the right move for you. Options may include closing the bank account from which the check was issued, or issuing a stop-payment on any outstanding post-dated checks.
Your bankruptcy attorney can explain these and other options to you in full. The purpose of bankruptcy is to help borrowers get a fresh start when they become unable to pay their debts.