How Payday Loan Debt Relief Gets Rid of Your Outstanding Balances

Payday loans are intended to help borrowers get money before their next paycheck is issued, and to help them pay bills or cover an emergency. They’re a useful financial tool when time is tight, there are no other options to find money, and you’re in danger of losing something you need to live your life. The downside to payday loans is the fact they carry punishing interest rates that can catch borrowers in a cycle of debt and prevent them from ever paying it off. Payday loan lenders in Indiana use the explanation that the interest is high because the debt is supposed to be for the short term and shouldn’t be extended. Yet, they allow people to extend their loans anyway.

Finding yourself in need of a payday loan suggests that you’re in a dire financial situation with a poor credit rating. That’s not necessarily a reflection on your financial decisions so much as it shows that you need help with payday loan debt relief. A payday loan, whether you have one or many, can quickly overwhelm your ability to repay them. The lender has no problem taking you to court with a payday loan lawsuit to get a judgment against you, then garnish your wages. The result is that you have less money to maintain your quality of life. Get payday loan relief with the help of an affordable bankruptcy lawyer before you reach this point. 

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Payday Loan Debt Relief Frees You from Your Debt and Creditors

The more you get wrapped up in the cycle of payday loan extensions, the more you pay in interest. The average interest rate on payday loans in Indiana is 382%, and the state offers consumers no protection against these rates of interest. A payday loan lender can charge as much interest as they like, and there are no laws to stop them. If you manage to repay your loan in the allotted time, you’ll pay about $15 to $20 per $100 borrowed, in one or two weeks’ time, depending on terms of the loan. If you fall into the 20% of people who can’t repay on time, you’re given the option of extending the loan. However, as you keep extending the loans, the interest rate compounds and eventually grows to an amount that’s much higher than what you originally borrowed.

Now you have a bigger problem on your hands than you started out with, and it won’t go away. It’s time to take a good look at your financial situation and make the decision to get payday loan debt relief in the form of bankruptcy. Not only can you eliminate payday loan debt in bankruptcy, you’ll avoid contact from a payday loan lawyer. There’s also the benefit of not finding yourself in a payday loan lawsuit. Bankruptcy also frees you from other debts that may have pushed you toward getting a payday loan in the first place. 

Getting Payday Loan Debt Assistance

There’s no secret about the fact that bankruptcy is an absolute and final option when it comes to clearing debts. It requires the help of a lawyer to avoid mistakes that can stop the bankruptcy, affects your credit score, and stays on your credit rating for seven to ten years. It’s understandable that you would prefer to find payday loan debt assistance to avoid bankruptcy, and there are options available to you in the form of renegotiating the terms or taking out a personal loan with a lower interest rate.

Renegotiating a payday loan can help you pay off what you owe, but the terms may not be much better than they are currently. A bankruptcy lawyer can help you with renegotiation along with getting more favorable terms for interest and repayment. It’s an option if you feel you’re capable of maintaining the terms along with your other existing debts, and it can help you avoid bankruptcy.

Taking out a personal loan to pay off the debt does have the immediate effect of lowering your repayment amount and stops the risk of being sued for debt. Using a personal loan also enables you to resolve the debt in a satisfactory way. The drawback is the fact that you still owe the debt, and you are at risk of default if you experience an interruption in your income. Ask yourself whether you can afford to take this risk. If the answer is along the lines of “no,” you’re better served by looking into payday loan debt assistance with the help of a bankruptcy lawyer.

How a Payday Loan Lawyer Helps You Eliminate Debt

One of the first steps you’ll go through when consulting with a bankruptcy lawyer who handles cases involving payday loans is to outline all of your debts, no matter their type. The lawyer reviews your debts and lets you know which ones can be discharged in bankruptcy and which ones can’t. A payday loan is an unsecured loan that is eligible for discharge in bankruptcy along with other similar debts you might have. After the initial assessment, the bankruptcy lawyer lets you know which chapter of bankruptcy is right for you; what you can expect from the process; and how it affects your credit rating, removes some liens if they exist, and stops wage garnishments.

Everyone’s financial picture is unique in terms of the types of debt they carry, but all debts fall under three specific categories. These categories include:

  • Secured debt
  • Priority unsecured debt
  • Non-priority unsecured debt.

Payday loans are considered a non-priority unsecured debt. That means you can eliminate payday loan debt through bankruptcy along with other types of non-priority unsecured debt. If you own a car or a home, they’re considered secured debt. The only types of debt that survive bankruptcy are priority unsecured debt. Here’s a look at the different types of debt that fall under each category:

Secured Debt:

  • Mortgages
  • Home equity lines of credit (HELOC)
  • Personal loans secured by collateral
  • Auto loans
  • Recreational vehicle loans

Unsecured Priority Debt:

  • Federal tax debts under three years old
  • Student loans
  • Child support
  • Spousal support
  • Funds or goods obtained through fraud
  • Fines or penalties owed to a local, state or federal government
  • Debts owed as the result of a DUI
  • Some cash advances obtained within 70 days of filing bankruptcy

Unsecured Debt:

  • Utilities (some)
  • Private student loans
  • Credit cards
  • Payday loans
  • Title loans
  • Medical bills
  • Unsecured personal loans

A bankruptcy attorney can explain in more detail how debts are, or aren’t, discharged through bankruptcy. However, note that you can eliminate payday loan debt through bankruptcy, as it’s an unsecured debt.

How a Consumer Bankruptcy Works

Individuals and couples are most likely to file a petition under Chapter 7 or Chapter 13. Chapter 7 is designed for both individuals/couples and businesses, but Chapter 13 is for individuals/couples only. All chapters of bankruptcy come with an expectation that the petitioner will make an attempt to repay their debt in some form or another. That’s why Chapter 7 is called a liquidation bankruptcy and Chapter 13 is known as reorganization. Reorganization allows you to literally reorganize how you pay back your debt over a period of time, and it also lets you keep your assets. In order to do this, Chapter 13 lets you create a repayment plan.

When it comes to Chapter 7, don’t worry about losing your assets just yet; there are options to reaffirm your debt and exemptions that protect your home and other assets from being sold. You should talk to a bankruptcy lawyer about these issues prior to making the decision to file. The bankruptcy lawyer can tell you what you need to know as well as outlining the different outcomes of Chapter 7 and Chapter 13. Here’s a look at the difference between the two:

Chapter 7

  • Discharge in three to four months
  • Trustee sells all non-exempt assets and property
  • Allows the reduction of principal loan balance on tangible personal property
  • Requires a petitioner to have little to no disposable income to pass the Chapter 7 means test
  • Liens cannot be removed

Chapter 13

  • Cannot have more than $419,275 in unsecured debt
  • Cannot have more than $1,257,850 in secured debt
  • Discharge in 36-60 months if all payments are made on time
  • Assets are retained
  • Debtor has to pay unsecured creditors the total value of nonexempt assets
  • Liens can be removed
  • Principal loan balances on secured debts can be reduced

Why Bankruptcy Offers Payday Loan Relief

Bankruptcy comes with a feature that’s known as the automatic stay. It’s technically an injunction that prevents collection of debts by creditors, but no matter which term you use, it stops creditors from attempting to collect on debts. Being granted a discharge at the end of the bankruptcy period makes this injunction permanent and creditors will never be able to collect on payday loans, or any other debt, ever again. The automatic stay goes into effect the moment your petition is filed with the Southern District of Indiana — United States Bankruptcy Court. Contact from creditors eventually stops, and you get relief from the constant demand for money you don’t have. 

Once your bankruptcy has been successfully completed, you get a fresh start on your finances. You’ll find that you have more money available to you as you’re not constantly trying to pay down debt with exorbitant interest rates. The benefits to getting payday loan relief through bankruptcy are much greater than trying to pay down your debt over a period of years.

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    Call the Law Office of Jerry E. Smith Today for Help with Bankruptcy

    Get in touch with Jerry E. Smith at (317) 917-8680 to learn more about how he can help you with payday loan debt relief. Our firm helps consumers and small businesses with debt resolution through restructuring and bankruptcy. We offer evening and weekend appointments for your convenience, and can get same-day filings for bankruptcy when possible.