Many people who have trouble meeting their financial obligations each month turn to payday lenders, especially if credit issues prevent them from obtaining a regular loan from a bank. These companies loan you a certain amount with a high amount of interest, all of which must be repaid in full when your next pay period concludes. You write out a check for the total amount owing, and when it comes due, most lenders give you the option of paying the loan in cash, allowing the check to be cashed, or paying a finance charge to roll the loan over until your next pay period.
Payday loans are illegal in New York because their interest rates exceed legally approved limits, but lenders get around the regulations by partnering with a bank in another state and carrying out all transactions online. These loans can be discharged in a Chapter 7 bankruptcy, but lenders will use a variety of strategies to prevent you from eliminating your obligation.
When you file bankruptcy, you must demonstrate that you did not take out any recent loans with the intention of using it and wiping out the debt via bankruptcy. Doing so is considered fraud and can get your case dismissed. The problem is that payday loans that are not repaid in full are set up to renew each month, so even if you originally took out the loan six months ago, the renewal process makes it appear like a “new” one every month. When you attempt to include it in your Chapter 7 bankruptcy, the lender may try to argue that the loan is technically new, and succeed in preventing the debt from being discharged.
Although this tactic has worked many times, there are ways of bypassing it and getting the fresh start you need. If financial difficulties have compelled you to take out several payday loans in the past, then you can explain to the bankruptcy court judge that you had no intention of committing fraud. You were simply trying to stay afloat financially.
If the lender has a post-dated check from you on file at the time you enter bankruptcy, they may try to cash it even though the automatic stay is now in effect. If this happens, then they will be ordered to return the funds, but you will still have to cover bank fees and other costs related to the check cashing. To minimize the risk of this possibility, you should contact your bank and put a stop payment on the check.
If you feel that Chapter 7 is the best solution to your financial difficulties but are worried about the predatory and aggressive collection tactics of payday lenders, then contact a New York bankruptcy attorney. A competent and experienced attorney will help you cope with these more complicated debts so that you can get the fresh start you need. Jayson Lutzky is a Bronx bankruptcy lawyer who has handled numerous cases over the past 34+ years. If you are in need of a fresh financial start, then set up a free in-person initial consultation with Mr. Lutzky. Visit www.MyNewYorkCityLawyer.com to learn more or call 718-329-9500.