Payday Loans and Chapter 7 Bankruptcy
Any individual who is planning to file for Chapter 7 bankruptcy in West Palm Beach or elsewhere in South Florida should ensure that all, or the majority, of their debts are dischargeable. Under the US Bankruptcy Code, certain types of debts are classified as “exceptions to discharge.” While many forms of consumer debt can be discharged (and are not in this category of “exceptions to discharge”), it is nonetheless critical to clarify the dischargeability of your debts with a bankruptcy lawyer. One type of debt that consumers often inquire about is debt from payday loans. Can payday loans be discharged in a Chapter 7 bankruptcy case? In general, the answer is yes. Our West Palm Beach bankruptcy lawyers can provide you with more information.
What is a Payday Loan?
In order to understand why payday loans are typically dischargeable — and why consumers are eager to have this type of debt discharged — it is important to have a clear understanding of the terms of these types of loans. According to the Consumer Financial Protection Bureau (CFPB), although there is no specific and uniformly used definition of a payday loan, the term typically refers to a “short-term, high-cost loan, generally for $500 or less, that is typically due on your next payday.”
Payday loans have certain things in common, according to the CFPB. They are usually for relatively small amounts of money and have relatively short loan terms, and they do not typically require a credit check (like a personal loan from a bank, for example). Yet they tend to have high interest rates and high fees. State laws govern many terms of payday loans, including in Florida. Under Florida law, payday loans can total a maximum of $500 per loan, and borrowers can only have one outstanding payday loan at a time. In Florida, payday lenders are permitted to charge a fee of up to 10 percent. Over time, fees can add up quickly if borrowers are unable to repay.
Payday Loans Are Usually Dischargeable
When it comes to dischargeable debt in Chapter 7 cases, payday loans are typically dischargeable. They are a form of unsecured debt, and they tend to be treated similarly to other types of dischargeable unsecured debt in a bankruptcy case, like credit card debt, personal loan debt, and even medical debt.
An exception to consider is a payday loan that could, along with other recently incurred debt, add up to an amount that raises concerns about presumptive fraud (within a 90-day or 70-day window prior to your bankruptcy filing). If you have any questions about this, it is important to discuss the details of your payday loan with a lawyer before you file for bankruptcy.
Contact Our West Palm Beach Bankruptcy Attorneys Today
The major benefit of a Chapter 7 bankruptcy is that eligible debts can be discharged at the end of the case, and the debtor can get a fresh start. Generally speaking, as we have discussed above, payday loans are dischargeable in Chapter 7 bankruptcy cases in South Florida. If you have questions or want to begin working on your bankruptcy case, you should get in touch with an experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller as soon as possible. Contact us today to learn more about your bankruptcy options and eligibility.
Sources:
consumerfinance.gov/ask-cfpb/what-is-a-payday-loan-en-1567/
flofr.gov/sitepages/PaydayLenders.htm
law.cornell.edu/uscode/text/11/523
law.cornell.edu/uscode/text/11
