Financial troubles can cause consumers to consider taking out a payday loan. These loans are tempting because the money can be made available quickly. They seem to be the perfect solution when you need to pay a bill, get your vehicle repaired, and more. However, problems can happen when you are not able to pay the loan back. Not only that, but many consumers have the idea that they cannot include a payday loan in a bankruptcy action. Read on for more information.
Payday Loans Are Non-Secured Debt
Two main kinds of debt are held by consumers. Some debts are secured which means the debt is secured by a specific item. If you have a car loan, for instance, the debt is secure, and the vehicle is the security. If you don't pay a secured debt, the item securing it can be repossessed, seized, or foreclosed upon.
On the other hand, non-secured debts have nothing to secure them. If you get behind on the payments, the creditor can take you to court but they cannot take any of your property. Non-secured debts can be numerous in a bankruptcy action since consumers often have several credit cards. Along with credit cards, non-secure debts include medical debt, personal loans, and payday loans. Unlike a car title loan, which is secured by the vehicle title, a payday loan has nothing to secure it.
Can A Payday Loan Be Included?
Knowing that a payday loan is a non-secured debt, some filers might hesitate to include it because of the paperwork they signed when they took out the loan. A lot of loans include wording warning debtors that this type of loan cannot be discharged using bankruptcy. Many of those applying for payday loans will sign whatever they must so that they can get the money. However, be sure and let your bankruptcy lawyer know that you have a payday loan in addition to your other debts. They will advise you to include it with your credit card and other debts.
Last Minute Loans
When you know that you are about to file for Chapter 7 bankruptcy, your actions may come under scrutiny by the bankruptcy trustee. Using a payday loan in the months leading up to a bankruptcy filing might take some explaining. Be ready to show that you need the money for something important. That might mean you needed food, an appliance, some tires, a medical procedure, etc. If you used the loan to go on vacation, no matter how much you deserved it, the loan may not be discharged. Speak to a bankruptcy lawyer to find out more.
