Payday Loans for Bankrupts

Last updated by Zaving Editorial Team, on May 20th, 2024

Explore the options for payday loans while dealing with bankruptcy with zaving's specialized insights.

Facing bankruptcy? Find out what this means when applying for payday loans. If you need some urgent cash to get you through a tight spot, you can turn to zaving to help you explore your options. Our online service makes applying for a loan quick, easy, and hassle-free. If your loan is approved, cash can land in your bank account straight away – it's as simple as that! Start the application process right here today with zaving.

What are payday loans and how do they work?

Payday loans, often referred to as cash advance loans, are short-term borrowing options designed to provide quick cash until your next paycheck. Typically, these loans are for small amounts, usually less than $1,000, and are repaid in a lump sum on your next payday, hence the name. They're intended to cover sudden expenses like medical bills or car repairs between paychecks.

To get a payday loan, you'll provide personal information such as your name, address, employment details, and bank account information to the lender. They'll verify your income and employment status to ensure you can repay the loan. If approved, you'll receive the loan amount, often on the same day or the next business day.

Repayment, including the loan amount, fees, and interest, is usually due on your next payday. However, this timeframe can vary based on the lender or state regulations. It's important to note that payday loans often come with high fees and interest rates, and failure to repay on time could result in additional charges or debt accumulation.”

Can I get a payday loan if I'm bankrupt?

Whether you can get a payday loan while bankrupt in the USA depends on several factors, including the specific bankruptcy chapter you filed under and the timing of your application.

Chapter 7 bankruptcy:

• During Chapter 7 bankruptcy, an automatic stay is issued, prohibiting creditors from collecting debts. This means that payday lenders cannot legally extend credit to you until the bankruptcy is discharged.
• Once your Chapter 7 bankruptcy is discharged, you may be able to obtain payday loans, but lenders may be hesitant due to your previous bankruptcy history.

Chapter 13 bankruptcy:

• Under Chapter 13, you create a repayment plan to pay off your debts over time. While the automatic stay prevents creditors from collecting debts during the repayment plan, it doesn't prevent them from extending new credit.
• However, you need court approval before taking on any new debt, including payday loans. The court will evaluate your proposed loan and determine whether it aligns with your repayment plan and is in your best interest.

If you are bankrupt, it is important to consult with your bankruptcy attorney before applying for any payday loan, regardless of the bankruptcy chapter you filed under. They can advise you on the legal implications of obtaining new credit and help you navigate the court approval process if needed.
Remember, payday loans often have high interest rates and can trap you in a cycle of debt. Explore other options and carefully assess your financial situation before considering a payday loan, even after your bankruptcy is discharged.

Does bankruptcy clear payday loans?

When you file for bankruptcy, all your debts, including payday loans, are typically listed in the bankruptcy petition. The inclusion of payday loans in bankruptcy depends on the type of bankruptcy you file—Chapter 7 or Chapter 13.

Chapter 7: Payday loans are often discharged (eliminated) in Chapter 7 bankruptcy. However, the lender might challenge the discharge, especially if they believe there was fraudulent activity involved or if the loan was taken shortly before filing for bankruptcy.

Chapter 13: Payday loans become part of the repayment plan in Chapter 13 bankruptcy. You'll be required to pay back a portion or all of your debts through a structured repayment plan overseen by the court.

Always consult with a bankruptcy attorney for personalized guidance on how payday loans and other debts may be affected by bankruptcy based on your specific situation and the bankruptcy chapter you plan to file.

More of your frequently asked questions about payday loans

Can I get a payday loan if I'm unemployed?

Obtaining a payday loan while unemployed can be challenging. Most payday lenders require proof of a regular income source, typically from employment, to approve a loan. Being unemployed might limit access to these loans since lenders usually prioritize income verification. However, some lenders may consider alternative income sources, such as government benefits or other regular income streams, to assess eligibility. It's crucial to explore options carefully, considering the potential high costs and ensuring repayment feasibility before pursuing a payday loan while unemployed.

What if I can't repay my payday loan?

If you're unable to repay a payday loan, it's crucial to address the situation promptly. Contact your lender immediately to discuss potential options, such as a repayment plan or alternative arrangements. Ignoring the issue can result in increased fees, collection calls, or even legal actions. Exploring options like extended repayment plans, negotiating with the lender for a feasible resolution, or seeking advice from financial counselors can help navigate the situation and prevent further financial repercussions.

What are the alternatives to payday loans?

Alternatives to payday loans include personal installment loans with longer repayment periods, credit union loans often featuring lower interest rates, borrowing from friends or family, employer advances, and seeking support from nonprofit credit counseling services or local financial aid programs. These alternatives offer more manageable terms compared to the high-cost, short-term nature of payday loans.

Do payday loans impact credit scores?

Payday loans might not directly impact traditional credit scores if they're repaid on time and as agreed. However, if repayments are missed or the loan goes into default, it could be reported to credit bureaus, negatively affecting credit scores. Moreover, some lenders might not report payday loans to credit bureaus at all, which means timely repayment may not positively impact credit scores. As credit scoring models consider various factors, the impact of payday loans on credit scores might differ depending on the scoring system and reporting practices of the lender.