Payday loan stores do present a great way for some people to get cash quickly in an emergency situation, as long as the recipient has a good understanding of the fine print and how the fees and "rollovers" work. These loans are often targeted toward those who are undergoing not just a temporary financial emergency, but a financial meltdown. For those unable to make good on the check, it could mean taking out loan after loan with fees accumulating into infinity. Since bankruptcy is often the next logical step, you may be confused about including that payday loan. Read on for more information about bankruptcy and payday loans.
Understanding the two types of debt obligations
When it comes to bankruptcy, your debt can only fall into two different buckets, secured and unsecured. Understanding how much you have of each kind of debt is important. Don't be put off by these terms, it's not a complicated explanation.
Secured debt: When you owe money that is directly connected to an object it is likely a secured debt. The two most common debt obligations that fall into this category are mortgages and car loan. The loan is "secured" by the home or the car, and if you fail to pay as agreed the property itself could be seized through foreclosure or repossession. Understand that this does not mean you will lose this property, but that a chapter 7 bankruptcy filing could allow you to keep that property in certain circumstances. It really depends on how far behind you are on payments, how much you still owe, what type of exemptions your state allows and how much your total bankruptcy debt comes to.
Unsecured debt: Money owed that is not tied to any particular piece of property is considered unsecured. The most common unsecured debt obligation is credit card debt. No matter what you have purchased with that credit card, be it a Visa or a store brand card, cannot be seized when you fail to pay your credit card bills. Additionally, most personal loans and signature loans fall into the unsecured debt category.
Payday loans: You may be happy to know that payday loans are considered unsecured debt, so that payday loan obligation should be listed right alongside all of your other debts on your bankruptcy matrix.
Loan paperwork: When you took out your payday loan, you likely signed a pile of paperwork. Among those pages was a statement where you agreed that you would not include this payday loan in any bankruptcy you file and that you will honor the debt regardless of any bankruptcy filing. The inclusion of this document in payday loan paperwork has become routine, and unfortunately many people take it seriously, There is absolutely nothing preventing you from including your payday loan in your bankruptcy, so do not leave it off your matrix. If you do leave it off, you will continue to be obligated for it.
Contact a lawyer, such as Greg Dunn Bankruptcy Attorney, for more help.