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Are You Able to File For Bankruptcy If You Still Have Outstanding Payday Loans?

You can either pay all or part of a payday loan in Chapter 7 bankruptcy, but it is better to avoid it altogether.  There are some special issues that you should consider before you file for bankruptcy.

Bankruptcy Creditor challenges Payday Loans

The majority of people will pay for things they purchase on credit, which is a good thing. What is the reason? It is considered fraud to take out a loan without knowing you will repay it.

In bankruptcy, you can’t discharge fraudulent debts. However, bankruptcy law contains rules that will help creditors to spot fraud. An adversary proceeding is a lawsuit that challenges your ability to discharge fraudulent debts.

What is Presumptive Fraud and How Can It Be Avoided?

If you have taken out a cash advance or payday loan within the last 70-90 days after filing bankruptcy, the presumptive fraud rule could cause problems. Transactions that violate this timing rule will be presumed fraudulent. It would be up to you to prove that your fraudulent intent was not present.

Is the Payday Loan Lender going to win its objection to discharge?

In bankruptcy court, payday lenders who challenge the discharge of their payday loan debts are often dismissed. Payday lenders who use payday loans are often not considered favorable by bankruptcy courts. They must prove that they were not fraudulent.

Payday loans are often short-term loans. Borrowers end up taking long-term payday loans to pay off the high finance charges and outstanding balances from previous payday advances. This cycle leads to borrowers relying heavily on high-interest payday loans for income. Courts often rule that there was no fraud and that the payday loan is not a single debt that goes back further than the last payday advance.

The consequences of fraud findings

Avoid fraud allegations in bankruptcy court. A fraud finding could result in you not being discharged for your debts, dismissal of your case, or even imprisonment. It’s simply not worth taking the chance.

Talk to a local bankruptcy lawyer to learn more about the practices of your court.

 

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