Are Payday Loans Dischargeable if I file for Chapter 7?
Posted By
Majed on Apr 19, 2010 7:00am PDT
Oftentimes payday loans seem innocent enough. Many consumers utilize these short-term loans when unforeseen emergencies arise or when there are simply more days in the month than money. However, these loans can easily spiral out of control with extreme interest rates and seemingly unlimited extensions, causing a vicious cycle. If you have filed or are considering filing for Chapter 7, you should know how payday loans are affected.
Payday loans are typically dischargeable under Chapter 7. Chapter 7 liquidation allows most consumer debt to be discharged outright, without setting up any type of repayment plan. Unlike federal debt, such as a student loan or federal income taxes, a payday loan is simply consumer debt and may be discharged in most cases.
The goal of Chapter 7 is to discharge consumer debt, giving the consumer a clean slate to rebuild their finances. A discharge simply means that a consumer is absolved from personal liability to repay a particular debt. There are many steps between filing for Chapter 7 Bankruptcy and obtaining a final discharge order. However, the most important thing to note is that payday loans are eligible for inclusion. Once a consumer has filed for Chapter 7 and met all of the requirements, a discharge will be entered, which will discharge the consumer of personal liability of certain debts, under the Chapter 7 agreement.