Can I Discharge Payday Loans in My Bankruptcy?

Payday loans can be dangerous forms of credit. Interest rates are astronomically high (according to an FDIC advisory, between 300 and 1000 percent when calculated annually), a significant number of payday loan customers take out multiple loans per year, and it’s difficult to determine a legitimate company from a fly-by-night business front.

Many customers get trapped in a never ending cycle. By the time the loan comes due on the next payday (along with an additional $1.50 to $2 for every $10 borrowed), the customer can’t afford to repay the loan and pay his current bills. He then takes out another payday loan for just a bit more. When one loan company stops extending credit, the customer moves to the next, borrowing to pay off the first. Nothing about this sounds good or appealing, right?

Typically, payday loans can be discharged in your Chapter 7 or 13 bankruptcy. But it just makes good sense to stay away from this scheme of lending in the first place. Don’t become one of the 12 million caught in a cycle of misery with these loans.