Bankruptcy and Payday Loans
Filing Bankruptcy For Payday Loan Debt
Payday loans can be a viable way to resolve short-term cashflow issues but they’re also an easy way to get into debt.
As these types of loans typically have high interest rates, it’s easy for your debts to spiral out of control.
If you’re considering potential debt solutions, you may be eager to know how bankruptcy affects payday loans.
What are Payday Loans?
Payday loan providers tend to target people who need fast access to funds.
If you don’t get paid until Friday but you run out of money on Tuesday, for example, you may choose to borrow $200 from a payday loan provider for four days, until your wages reach your account.
However, you’ll pay a relatively high rate of interest over these four days and if you don’t pay the loan back on Friday, the amount you owe will increase quickly.
Despite new regulations designed to curb the behaviour of payday loan companies, these loans continue to be a source of confusion for consumers.
Many people simply don’t understand how their debts become unmanageable so quickly because it’s easy to overlook how dangerous high interest rates can be.
Does Bankruptcy Eliminate Payday Loans?
Payday loans are generally a form of unsecured debt.
This means that bankruptcy and payday loans work well together in relation to eliminating your liability.
If you file for bankruptcy and you have payday loans, you will no longer need to pay them.
Instead, your payday loans will be written off when you are declared bankrupt, along with many other forms of debt.
Can You File for Bankruptcy if You Only Have Payday Loans?
Technically, you could file for bankruptcy if the only type of debt you have is payday loans.
However, most people who choose to file for bankruptcy do so because they have other types of debt too.
You may have a mortgage, car finance, credit cards, secured loans and unsecured traditional loans, as well as payday loans, when you finally decide to bankruptcy, for example.
Due to the high interest rates associated with payday loans, they are rarely anyone’s first choice.
In many instances, people use payday loans as a last resort before realizing their financial situation is unmanageable.
At this point, they begin looking for debt solutions, such as bankruptcy.
When Should You Claim Bankruptcy?
Bankruptcy may be the best way for you to resolve your financial problems but it’s important to get independent advice before you decide which type of debt resolution is right for you.
Although bankruptcy will eliminate your debts, it does have long-term consequences on your ability to access credit.
By speaking with a licensed insolvency trustee, you can find out what debt solutions are available to you and learn more about the implications of each one.
This will give you the opportunity to find out more about bankruptcy and payday loans, as well as exploring alternative options.
To access support and guidance now, contact Bankruptcy Canada on (877) 879-4770.