There are many ways in which payday loans are handled in case of a bankruptcy. First, it is vital that you understand that there are two types of bankruptcies; chapter 7 and chapter 13. A chapter 7 is when your assets are sold and you are liquidated. Payday loans during bankruptcy will be paid off and you are left debt free. Chapter 13 is when you make enough money to be able to pay off a certain portion of your debts, chapter 13 comes into effect when you have a steady source of income.
Payday loans are advances that are handed out by lenders that are short term. They are meant to be paid back at the next payday, hence the name. The distinguishing feature of these payday loans is that they are not secured and there may not be a thorough scrutiny of your credit situation. The loans are also instant, so you might be able to get them in a span of few hours or a day, at the most. Payday loans are also notoriously expensive. Since they are meant to only last a few weeks, the interest rates are really high.
Payday Loans During Bankruptcy
In a chapter 7 bankruptcy situation, your payday loans will be discharged. The debt will be treated like one given to an unsecured creditor. In case of a chapter 13 bankruptcy, your discharge will be treated like that of an unsecured creditor as well. You will still have to pay a small portion of the loan. It may be a minuscule portion, but it will need to be paid. In instances where you have filed for a bankruptcy in a time period of 70 to 90 days after getting a loan, the lender is free to contest or challenge the discharge in a court of law.
Contact a bankruptcy lawyer in Houston to get quick relief from these debt traps.