Is Your Payday Loan Dischargeable If You File Bankruptcy?

7 January 2015
 Categories: Finance & Money, Blog


Payday loans are sort of a new age loan. While they do charge very high interest rates, the number of payday loans continue to grow. These loans are idea for people who need small, short-term loans, but borrowing too much can get you into trouble, especially if you are already having financial woes. Once you've hit rock bottom financially, you may be considering filing bankruptcy and wondering whether that payday loan dischargeable along with your other debts in Chapter 7. Well, here's what you should know. 

How Payday Loans Work

The lender offering payday loans accepts a post-dated from you for cash. They cash the check for you with the understanding that you will buy back the check for the amount of the advance plus their fee. They are called payday loans because this "buy back" is supposed to take place on your next payday. However, you should look into different lenders, as some charge interest rates as high as 500 percent or more.

While not all lenders of payday loans are crooked or charge high fees and interest rates, you have to be careful from whom you borrow. There are large, reputable banks that are in the payday loan business and are reputable, but anytime you are already strapped financially, you should take careful consideration before taking out any type of loan. Make sure you can pay back what you borrow to avoid digging yourself deeper into debt. 

Payday Loans And Bankruptcy

Payday loans should be dischargeable in bankruptcy, like other types of loans. However, you can't take out a payday loan right before filing bankruptcy and try to have it wiped clean. Bankruptcy laws state that you cannot accumulate new debts right before filing. This is fraudulent behavior. If you take out loans or make luxury purchases two to three months before filing bankruptcy, this has deceptive behavior written all over it. 

If you do intend to file bankruptcy, you should not take out any type of loan. Instead, talk to a bankruptcy attorney first to see if filing bankruptcy can get you a fresh start. You can also discuss other types of debt relief, like credit counseling and other forms of bankruptcy. 

If you are not sure which debts you've incurred are dischargeable when you file bankruptcy, talk to an attorney. If you've recently taken out a payday loan to try to get out of financial trouble, but is hasn't worked, you'll need to wait before filing, so you don't look like a fraud. Visit a pay day loan company like for more information.