Indiana Bankruptcy Blog-Can Payday Loans be Included in Bankruptcy

           A recent trend I have noticed in folks I meet with to discuss bankruptcy in the Indianapolis area is that they have a payday loan.  As we all know, payday loans can easily turn into a vicious cycle of taking out a second loan to pay the first loan, third loan to pay the second loan.....and before they know it people just can't keep up.  The high fees and interest rates associated with payday loans often push those teetering on the brink of bankruptcy over the hump.

          On top of that, there seems to be a major misconception that payday loans are not dischargeable in bankruptcy.  I assume that this misinformation comes primarily from payday loan companies that try to convince their clients it is impossible to discharge a payday loan in bankruptcy.  This is simply not true.  Most payday loans can be discharged in bankruptcy just as any other unsecured debt.  So, don't let the payday loan company call you up and scare you into taking money you were going to use to pay for groceries.  Yes, the payday loan company could sue you and they would be able to get a judgment for the money owed as well as attorney fees, late fees and more interest.  Once they obtained a judgement the next step would be for them to garnish your wages, which I discussed in a previous blog.  However, if you file a bankruptcy the garnishment will stop and the payday loan will likely be discharged.

         Another tactic I have heard payday loan companies use is that they would turn the client's name over to the prosecutor's office for a bad check if the loan was not paid.  It is true that in Hamilton County Indiana there is a bad check department of the prosecutor's office.  The prosecutor can (and will) charge a person with check deception under IC 35-43-5-5 in the event that they present a check knowing at the time of presentation that it is a bad check.  However, there is an exception to the general rule regarding post-dated checks.  Since at the time the loan is taken the debtor writes a post-dated check which is to be cashed on payday the payday loan is an exception to the check deception statute in Indiana.

        If there is one thing that I would bet on it is that your payday lender will tell you that you can't include your payday loan in a bankruptcy, you agreed you wouldn't include it in a bankruptcy or that because you received the cash it would be fraud to try to include it in your bankruptcy.  I can tell you that I have filed bankruptcy petitions for people in the Southern District of Indiana with payday loans and have never had a payday loan be excepted from discharge.  If you are caught in the payday loan cycle and believe you may need the relief that can be provided under the bankruptcy code contact me for a free initial consultation.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.