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Understanding Chapter 7 Bankruptcy and Its Impact on Payday Loans ?>

Understanding Chapter 7 Bankruptcy and Its Impact on Payday Loans

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Can Payday Loans Be Included in Chapter 7?

Before knowing if a payday loan can be included in chapter 7 of the US bankruptcy code- or popularly “chapter 7”- it is important to know what the US bankruptcy code and its chapter 7 are.

  • United States bankruptcy code, is a set of rules regarding bankruptcy in America. It is also called “Title 11 of the United States Code”. It has 15 chapters, and chapter 7 talks about liquidation and bankruptcy.
  • According to the chapter 7 of the united states bankruptcy code, liquidation occurs when a person files for bankruptcy being unable to pay the outstanding debts. For an individual to file for a straight bankruptcy, s/he should be a legal resident of the US and should be owning business or property here. In a federal court, one can file for the formalities, and cannot repeat the same within 180 days. If a person files for another bankruptcy within that period, it will be rejected.

 

Yes, Payday Loans Can Be Listed in the Chapter 7 Bankruptcy

Payday loans are short-term unsecured emergency loans people borrow to address cash shortage until the next paycheck day. Partly, sometimes when people are financially not stable they use these payday cash advances and pay high interest. Using such sources of funding for a long time can put the debtor in debt trap. The good thing is, if the debtor is filing for bankruptcy anyway, according to chapter 7 of the united states bankruptcy code payday loans can be listed. More importantly, they come under unsecured loans category and are not considered to be significant. That means the loan amounts can be discharged without repayment.

In this scenario, if your lender opposes the discharge of the loan legally and wins the case, then the borrower has to make the payment. However, not many lenders do that since the borrowed money in case of payday loans are not more than $1,000.

That does not mean a debtor knowing that repayment is not possible, should borrow money. This is ethically and legally wrong and can put the borrower in trouble. Chapter 7 also advocates fair customer behavior from those who borrow.

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