Payday and Title Loan Risks in Bankruptcy

Often taken as a last minute measure, payday loans are a high-interest, easy-to-procure kind of advance that are meant to be paid back in a few months. Under bankruptcy though, they are treated as an unsecured loan. Before looking for fast cash, learn the payday and title loan risks.

Payday and title loan risks

Payday loans and title loans are exorbitantly priced. A typical title loan or a payday loan can be nearly 300% in interest. If they are not paid by the end of the month or within the set date, they are rolled into the next month with a fee. In due course of time, these loans can rake up so much in interest that it will exceed the principal amount.

In bankruptcy, they are discharged. They are treated like unsecured loans and are readily wiped out. In chapter 13, they are treated like a credit card debt, but with even less priority. You will end up paying pennies on the dollar for it as per your repayment agreement. In some cases though, the lender might decide to fight back and challenge the court’s ruling.

If the loan was taken within 70 to 90 days of filing for bankruptcy, they might choose to challenge the judgment saying that it was the borrower’s (your) intention, to take the money and not have to repay it at all. However, that would mean lenders will have to prove intent to commit fraud and that is not easy. Bankruptcy courts are also not too friendly towards payday and title lenders, so you are quite safe when it comes to their legal retaliations.

However, there are chances that the lender can prove misdeeds, and you will have to pay it out. So, if you are going to file for bankruptcy, wait for a little over 90 days and then file. If you are stuck in the payday loan cycle, end it today. Our team of Rancho Cordova bankrutpcy lawyers can help get you out of debt the right way.