Will my payday loans be wiped out in my bankruptcy?

I've taken out several payday loans that I can't pay back and now I owe them a lot of money as well as owe a lot of other money. Will those payday loans go away if I file bankruptcy?

Payday loans are short-term loans with a very high interest rate. If you can't pay them off as planned, they can become a large debt burden. To get those loans, you give the lender a post-dated check which they will deposit if you don't make the payments. In the case of online payday lenders, you agree to let them take their money from your bank account if you don't keep up with the payments.

You may not owe enough on payday loans to make it worthwhile to file bankruptcy, but if you also have debts from credit cards and other things, possibly bankruptcy would be valuable for you. Your entire financial situation would need to be reviewed by an experienced bankruptcy attorney, but for now let's say that you've decided to file bankruptcy and are wondering about your payday loans.

Many pages have been written on this subject which you can find on the internet, but here's the short version.

1. In general, your payday loans would be treated just as any other unsecured debts (like credit cards) and would be discharged (eliminated) in your bankruptcy.

2. The post-dated check you gave them (or the agreement to take the funds from your bank account) should be dealt with before you file bankruptcy by closing that bank account. But first open a new one so you know you have some place to put the money from that old account. If you don't do this, the payday lender will simply cash the check and take the money. You might be able to get that money back by suing the lender as a part of your bankruptcy case (called an adversary proceeding) but that might cost more than the amount of money taken by the lender. It's much better to just avoid the problem.

3. If you took out a payday loan close to filing bankruptcy, the lender could claim that you knew at the time that you weren't able to pay it back. The lender may not bother to claim that, but I'd prefer that you wait three months after the last payday loan to file bankruptcy.

4. You will NOT go to jail for causing the post-dated check to bounce. The lender knew at the time it took your check that you didn't have money in the account to cover it, so it wouldn't become a "bad check" in the criminal sense regardless of what the payday lender may tell you.

Of course the best advice is to never take these very expensive payday loans. It's too late for that to help now, but think about it in the future.

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34 Comments

CarolJanuary 29th, 2014 at 1:10 pm

I am filing bankruptcy and I toke out payday Loans 2008 and 2007 I never received any information I paid 2 other loans I actually did not remember the loans from 2008 and 2007. They are calling me harassing me saying they are going to file charges and sending sheriffs to my job and constantly calling. I did explain I am filing bankruptcy but they did not want to hear that or take the information down. What do I do about this?

Malcolm RuthvenJanuary 29th, 2014 at 1:29 pm

Carol, you say you are "filing bankruptcy". Have you retained an experienced bankruptcy attorney? If not, you should do that immediately. Filing bankruptcy with creditors threatening you is not a DIY project. That said, payday loan companies are known for making threats that they cannot fulfill. But telling them that you're going to file bankruptcy doesn't accomplish anything. You either file bankruptcy or you don't. You ask "What do I do about this?" You retain an experienced bankruptcy attorney in your area and see if filing bankruptcy would be possible and a good thing for you, and if so go ahead and do that

CarolJanuary 29th, 2014 at 1:46 pm

Yes I have retained and Attorney.

Malcolm RuthvenJanuary 29th, 2014 at 2:03 pm

Then you need to discuss this matter with your bankruptcy attorney.

All the best to you, Carol.

ToneyFebruary 27th, 2014 at 1:21 pm

on these payday loans, what if filing bankruptcy, the money is set up to automatically come from your checking account, then how do you stop this. Does the attorney take care of this

Malcolm RuthvenFebruary 27th, 2014 at 1:51 pm

Toney, read #2 in the article above. It explains that you need to close that bank account and open a new one somewhere else before you file bankruptcy.

Malcolm RuthvenMay 27th, 2014 at 4:07 pm

I'm not sure what you mean by "can I file him". Since you're asking a bankruptcy attorney, I assume your question has to do with bankruptcy, and the only person you can file bankruptcy for is yourself. That would eliminate your debts, including the payday loan, leaving your co-worker as the only one the loan company could go after to pay that loan.

Ronald ReffJuly 12th, 2014 at 7:33 am

I filed for bankruptcy on 02/19/13 and the bankruptcy was discharged on 3/22/13. The problem is I have been continually called by a payday loan provider called Ashland Enterprises-although it is hard to pin down a physical address and phone number. When I filed my attorney told me to give him absolutely everything I could find on Ashland Enterprises, addresses and phone numbers. The crazy thing was that it was listed under about 10 different names and phone numbers. The attorney told me that they do this to discourage people from suing them because it is such a hassle. Anyway the latest call was from a guy representing Q.C. Holdings but he wouldn't give me the specific name of the creditor I supposedly had a debt with. He said there was a bench warrant for my arrest which I knew was bogus. This payday loan with Ashland Enterprises was incurred in 2011 and was listed on the bankruptcy. I have them calling me saying they are a private investigator and that I am under criminal investigation, they have said I am under fraud investigation, that I have a summons, and also the bench warrant thing. I know these are all scare tactics but how do I get them to stop?

Malcolm RuthvenJuly 12th, 2014 at 8:04 am

Ronald, you said "I filed for bankruptcy on 02/19/13 and the bankruptcy was discharged on 3/22/13" which doesn't seem right because a Chapter 7 bankruptcy takes about three months to go from filing to discharge of debts. But I'll assume that you did get a discharge of debts in a Chapter 7 bankruptcy and the Ashland Enterprises debt was discharged. That said, as you're finding out, those people will resort to about anything to get you to send them money and they are difficult to find and difficult to sue and collect against (they certainly have done enough to allow you to sue them). As a practical matter there is really not much you can do to get them to stop. If you can block their calls, do that. If not and you can tell that it's them calling, don't answer. If they send you anything in the U.S. Mail, take it to your post office and file a complaint. Sometimes the postal service will follow up. I hope a lot of people read this just to warn them against taking out payday loans.

Ronald ReffJuly 12th, 2014 at 8:13 am

Thank you so much. I will follow your advice and will block their calls.

Sandra GallegosAugust 26th, 2014 at 10:03 am

I am in california and I recently had a collection agency for a loan taken out on the internet with multi loan source and this guy jim carter from texas threatened me saying there would be a warrant out for my arrest, so I back tracked to multi loan source who then gave me the # to the collection agency #1 and then they referred me to collection agency #2 which I spoke to a Peter THomas which I sure is the same guy threatening me with an arrest using the alias name Jim carter, can a person be prosecuted for a loan by phone and this guy also told me I would not be able to file on my Bankruptcy. Is this legal these scare tactics I am getting ready to file a claim with the ca attorney General and federal trade commission.

Peter Thomas told me to ignore any calls from Jim Carter and I was also told that had I agreed to send the money to settle the debt I would have been sending the money to someone that would not have sent the money tosettle the debt, it would not have been forgiven, and Peter Thomas at autobond holdings told me that my acct was no longer handled by that gentleman and before I could explain, he stopped me and new about this jim carter character and I asked that he help with this guy and he refused nonchalantly, end result peter thomas got me to agreeto two post dated payments to settle my $826 debt, with money I dont have, at that point I was concerned.

Malcolm RuthvenAugust 26th, 2014 at 11:29 am

Sandra, your experience with payday loan companies trying to collect debts is pretty typical. They're known to say all sorts of things that aren't true. Since your comment here is about my payday loan article, I assume you read it and know that your payday loans would be treated just as any other unsecured debts (like credit cards) and would be discharged (eliminated) in your bankruptcy and that you will not go to jail because of that debt. I strongly recommend that you consult with an experienced bankruptcy attorney in your area. If you're in the San Francisco Bay Area, feel free to get a consultation with me: http://ca-bankruptcylaw.com/free-consultation

michelleOctober 5th, 2014 at 6:08 pm

I have so much debt in payday loans I cant afford to pay them back and credit cards can I file bankurpty on them all and personal loans im so much in dept I cant do it nomore its so stressful and medical bills.

Malcolm RuthvenOctober 5th, 2014 at 6:23 pm

Michelle, from what you said, yes, bankruptcy would be able to get rid of your debts including payday loans. Be sure to consult with an experienced bankruptcy lawyer in your local area to be sure, because details (more than can be discussed here) are important. If you live in the San Francisco Bay Area, I'd be happy to give you a free consultation. Click "Free Consultation" on the menu bar at the top.

jeanneFebruary 18th, 2015 at 12:19 pm

We are filing chapter 7 and My lawyer told me to stop payment on the check and now I have the prosecuting attorney telling me she is going to issue a warrant if I don't pay it by the 2…

Malcolm RuthvenFebruary 18th, 2015 at 2:14 pm

Jeanne, I have no idea what's going on from your description, including what payment to whom. In any event, you need to ask your own attorney, not someone like me who knows nothing about your situation.

TraceyFebruary 19th, 2015 at 3:34 pm

I have an appointment next week with a bankruptcy attorney. I have several payday loans. At what point should I close my bank account. They take the money electronically.

Malcolm RuthvenFebruary 19th, 2015 at 3:38 pm

Tracey, if I were you I'd close that account ASAP. Move the money in it to a new account at a bank where you don't owe money (for example, owing on their credit card), and also not Wells Fargo or Union Bank (they are known to put holds on accounts after a bankruptcy filing). If you live in the San Francisco Bay area, I'd be happy to give you a free consultation. In any event, all the best to you.

Karen RigbyFebruary 25th, 2015 at 1:58 am

can a attorney find out you have payday loans if it's not on a credit report?

Malcolm RuthvenFebruary 25th, 2015 at 6:59 am

Karen, I'm not clear why an attorney (not working for the payday loan companies) would want to find out you have payday loans, but I don't really know of a way to find that out other than by credit reports. Unless the payday loan companies are suing you and someone would find out from court records which are available to the public.

Bailie SmithApril 13th, 2015 at 9:07 am

I filed bankruptcy in November of 2012 and it was discharged in February of 2013. I just received a call from a payday loan that was included in the bankruptcy saying that they will put out a warrant for my arrest if I don't appear in court on fraud charges. They said that the bankruptcy only took care of the interest but not the actual check amount that was written. Can you please let me know if this is true? Thank you.

Malcolm RuthvenApril 13th, 2015 at 9:18 am

Bailie, as I wrote in this article (and I'm sure you read), payday lenders will tell you what they told you even though it's not true. I assume you closed the bank account that the check was written on before you filed your bankruptcy. If they keep harassing you, contact your bankruptcy attorney.

MarrahApril 14th, 2015 at 7:29 pm

I took out a payday loan yesterday to put money towards a car. And found out with all my credit issues I can't get a car with out a cosigner. I called the payday place and told them I'm filing for bankruptcy due to lots of debt. 30 mins later at 8:30 pm a corporate person threatens me and says i better not file else I will get in big trouble with the law. I already closed bank accounts and got a new debit card ordered. I am going to file Friday. Now I'm scared because the lady said I'm frauding. Which I am not I took the money out for two car companies who ran my credit and didn't get approved. What are my chances or what will happen??? I have a top notch lawyer the best in the area.

Malcolm RuthvenApril 14th, 2015 at 7:40 pm

Marrah, I'm not sure why you're asking this question. You've read my article above that explains how these companies operate and how they lie to you. You also say you have the best bankruptcy attorney in your area (whom I assume says it's OK for you to file bankruptcy). Trust your own "best in the area" attorney.

VeronicaApril 21st, 2015 at 1:50 pm

Got a call today after almost seven years of claiming bankruptcy! I can't believe they are still out there trying to scam me out of money! It's scary though, as I don't want any criminal fraudulent charges! They say my summons is on the way for writing bad checks that went into bankruptcy. From almost seven years ago!? I called my bankruptcy attorney right away and he told me it's a scam! Like I said just scary to get a call like that! After I talked with my attorney I googled some helpful tips, thank you for your advice Malcolm Ruthven! :)

Malcolm RuthvenApril 21st, 2015 at 2:04 pm

Veronica, glad I could help a bit. And good for your own bankruptcy attorney for knowing it was a scam. Aren't payday loan companies fun!

TanyaMay 7th, 2015 at 10:19 am

I file for chapter 7 in February 2014. It was discharged in June 2014. Now I'm starting to get calls from a payday loan that I got on line. I mention I filed chapter in 2014. They said they pulled my bankruptcy file and I did not mention their company on it. They threaten to sue me for fraud and check theft. Also, they will send summons from sheriff department for garnishment of my wages. Can they do this?

Malcolm RuthvenMay 7th, 2015 at 11:01 am

Tanya, if you'll read the article above again, you'll see that what they are threatening you with is typical of what they do. Now about the fact (if true) that you didn't list them as a creditor in your Chapter 7 filing, in California that debt is eliminated anyway (assuming that the rest of your creditors got nothing from your bankruptcy). If you don't live in California, you'll have to check with a bankruptcy attorney in your state about that issue. In any event, you should be asking your own bankruptcy attorney about this because he/she knows the details of your bankruptcy.

DesireeMay 21st, 2015 at 6:28 pm

Question: I live in California. In early January I got one of those installment loans that was approved because I have a car. Something about a title type loan (The car is not paid off and the bank has the title) Then in mid January 2015, same month, I had to file bankruptcy because a creditor was sueing me and my checks were going to be garnished. Now my bankruptcy was discharged in May 2015 but when I mentioned this loan to my attorney he said not the mention it. Do I still have to pay this debt even though it was not included in my court paperwork?

Malcolm RuthvenMay 21st, 2015 at 6:43 pm

Desiree, something doesn't sound quite right. I can't offer you legal advice about your case because I'm not your attorney and don't know the details of your case. That said, when filing bankruptcy you swear under penalty of perjury that you've listed all of your assets and all of your debts. So you should have listed that auto loan, but you say you didn't list it. What happens now? Whether you listed it or not, if the lender has a security interest in your car, they can repo the car if you don't make the payments. Do they have a security interest? There's no way for me to know. Ask your own bankruptcy attorney about that. If the do repo the car, would you owe any outstanding balance on the loan? Maybe not, but again I can't give you legal advice about this; you'll need to ask your own attorney.

Marie WilsonJune 15th, 2015 at 9:00 am

Considering filing chapter 7 bankruptcy. During the time I purchased my car in January 2014 – I was working – I was laid off August 2014. I am behind in my car payment because of the above mentioned. Can I file my car on the chapter 7 bankruptcy? Also, can I put my pls loan on it. My daughter attended college with student loans – I co-signed for her – not able to make payment. The balance is $14,000. Can I also file those student loans

Malcolm RuthvenJune 15th, 2015 at 9:07 am

Marie, you've asked multiple questions that would take more consideration and space that is available in these comments or on any online location. Do yourself a big favor and get a consultation with an experienced bankruptcy attorney in your area.

Louise DoyleJuly 1st, 2015 at 12:51 pm

I had a payday loan back in 2007. I filed a chapter 13. Here it is 2015 & there harassing me telling me I committed fraud and there going to send it to county. I told the man I filed bankruptcy back then. Can they still get any money after 8 yrs gone by? Can they do anything?

Malcolm RuthvenJuly 1st, 2015 at 12:59 pm

Louise, you didn't say if you received your discharge of debts in that Chapter 13 bankruptcy, and if you listed that payday loan in your schedule of debts. If the answer to both questions is "yes", then you shouldn't owe them anything. Send them a copy of your discharge of debts. Those companies are known to lie about most anything to get you to pay them.

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