Payday Loans and Bankruptcy
Payday loans can seem like an attractive option if you are struggling financially to make ends meet. However, getting quick money now can lead to substantial financial challenges later on, including being charged with possible fraud if you make the decision to file for bankruptcy.
Understanding Payday Loans
Payday loans are usually a service provided through a business that provides cash quickly to those who are in need of immediate money, in order to either make ends meet or pay immediate debt obligations. Most of these loans are short-term loans with an extremely high-interest rate attached to them. Typically there is no credit check required, and oftentimes the cash will be provided on the spot.
This quick money can be very appealing to those who are facing an overwhelming debt as a temporary band-aid financial fix to delay their financial solution a bit longer. However, these payday loans can result in interest rates that charge up to 400% of the amount of money borrowed. For those struggling financially, there is almost no circumstance or scenario where they will be able to fully pay this amount back in a reasonable period of time, thus ultimately resulting in the eventual garnishment of the debtor’s wages. To add insult to injury, these untimely payments will also negatively affect the debtor’s credit score making it more and more difficult for them to stop this cycle of debt and resolve their financial struggles.
Presumptive Fraud Rule
If a debtor makes the decision to take a payday loan, the good news is that oftentimes that loan is discharged within a Chapter 7 bankruptcy. However, if you have taken out a payday loan within 70-90 days of filing for bankruptcy, the court will assume you are attempting to fraudulently apply for bankruptcy with bad intentions, which is the presumptive fraud rule. The burden would then be on you to prove that you did not intend to defraud the court by filing for bankruptcy so soon after taking out a payday loan.
Unfortunately, more often than not, those that start to take out payday loans fall into a cycle of taking payday advances to pay the finance charges and balances on their previous loans. If this is truly the debtor’s situation, the court will typically find that there is no actual fraudulent intent by the debtor and that the entire pattern of taking out payday loans is simply one single debt that dates back to the original payday advance granted.
Contact an Attorney for Help Today
If you are in a never-ending cycle of continuing to need to receive payday loans to keep yourself afloat, you should consider filing for Chapter 7 bankruptcy for a financial fresh start. Learn your legal rights regarding bankruptcy by contacting the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton & Kaplan at 561-264-6850 for a free consultation. We can help you understand how bankruptcy might be able to help you break the payday loan cycle once and for all.