Payday loans can come in handy when desperate times call for desperate measures. If you are not prepared in advance for an emergency like a car repair or a late rent payment, you may have no choice but to take out one of these loans. If you have a payday loan and are considering a chapter 7 bankruptcy filing, you may be wondering if you can add that loan to your bankruptcy petition. After all, if you are making that major financial move and willing to suffer the ramifications, you certainly want to get rid of as much debt as possible. For more information about how a bankruptcy filing treats payday loans, read on.

The Difference Between Secured and Unsecured Debt

A debt that is secured has collateral to back it up if you don't make your payment. For example, your auto loan is a secure debt since the vehicle could be repossessed and sold, allowing the lender to recoup some of the loan balance if you fail to pay as agreed. Secured debt can be included in your bankruptcy, but you may lose the property associated with the loan, depending on how much you still owe and your exemptions.

A debt that is not secured by any property is an unsecured debt. Most often, credit cards and personal loans fall into this category. If you fail to pay on your credit card debt, the creditor cannot simply come in and start taking your property. Unsecured debt often prompts people to declare bankruptcy, and most unsecured debt is normally forgiven with a chapter 7 bankruptcy filing. Payday loans, not to be confused with title loans, are unsecured debt and are therefore potentially a debt that may be discharged with bankruptcy and without surrendering any property. 

The Payday Loan Disclaimer Issue

When you signed that stack of paperwork to get your payday loan, among the many documents was a disclaimer about discharging a payday loan through bankruptcy. This document, which you had to sign as a requirement of getting the needed loan, indicates your understanding that your payday loan must be paid as agreed regardless of any bankruptcy filings. Don't allow this disclaimer to prevent you from including this loan on your bankruptcy petition. Failure to include the loan could mean that you will continue to be responsible for it even after your other debts are long gone. No matter what document you signed, your payday loan is a non-secure debt and may be discharged right alongside your credit card debt

Taking An Unfair Advantage Using Credit

You should understand that there are some rules and timelines when it comes to using your credit cards to purchase items, take cash advances, and take payday loans out when done near the time of your bankruptcy filing. Be ready to prove that your payday loan, or any other recent charges, were necessary and not for a frivolous purchase.

Payday loan companies are predatory lenders and are not looked favorably upon by the bankruptcy courts. Don't allow the underhanded tactics of these lenders prevent you from including a payday loan in your bankruptcy. Speak with your bankruptcy attorney for more information. 

For a bankruptcy lawyer, contact a lawyer such as Todaro David M Co LPA. 

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