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Are Payday loans Discharged in Bankruptcy?


Many potential bankruptcy filers are trapped in a cycle of payday loans. Payday loans, also known as cash advances or paycheck advances, are short term loans that are offered at a high interest rate. These types of loans are often appealing to those who aren’t able to make their monthly bills. It's understandable; this is a good way to get cash until your next payday. However, if you're already unable to make your monthly payments these types of loans can start a cycle that is hard to break, and due to the fact that they are high interest loans, you may find yourself in more debt that you began with.

Many filers want to know, can you discharge a pay day loan in a bankruptcy?

First you should know, yes it is possible to have a pay day loan discharged. A pay day loan is usually an unsecured debt, and in general, these are treated as any other unsecured debt in bankruptcy.

  • During a Chapter 7 Bankruptcy - a debtor is allowed to discharge debts without repayment in a chapter 7 bankruptcy. Almost all unsecured debts are discharged in this type of bankruptcy, including pay day loans.
  • During a Chapter 13 Bankruptcy - a debtor is required to repay their debts using a structured repayment plan. Pay day loans, in this case, will be treated like any other debt. Though, the filer may be permitted to discharge this debt under a hardship provision if they are unable to complete the repayment plan.

It's crucial that when receiving a payday loan that you read the entire agreement with your lender. It could be included in this agreement that you are not able to include your pay day loan in a bankruptcy. This is a scare tactic, and is not upheld by any laws. It is also good to remember that you cannot discharge debts that were incurred 60-90 days within filing a bankruptcy.

If you're still not sure about your specific situation calling an experienced bankruptcy attorney can help. They will be able to assist you through your unique case and be able to answer all of the questions that you may have. Don't file alone, call today to find out how a great attorney can help you get the most from your bankruptcy.

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