Payday Loans Are Fully Dischargeable
Payday loan debt is unsecured consumer debt that is fully dischargeable in Chapter 7 and Chapter 13 bankruptcy. There is no special exception for payday loans. Once discharged, the lender cannot collect, call, or take any action to recover the debt. The discharge also eliminates any associated fees, interest, and penalties.
Timing Considerations
If you took out a payday loan shortly before filing bankruptcy, the lender may argue it was obtained with intent not to repay (fraud). Generally, loans taken out more than 90 days before filing are not challenged. Loans within 90 days may face scrutiny. Consult your bankruptcy attorney about timing if you have recent payday loans. For discharge eligibility, check the screener.
Chapter 7 vs. Chapter 13
Chapter 7 eliminates payday loan debt entirely in about 90 days. You must pass the means test. Chapter 13 includes payday loans in the repayment plan at a fraction of the balance, with the remainder discharged after 3-5 years. Either chapter stops collection activity immediately through the automatic stay.
Post-Discharge Protections
After discharge, if a payday lender contacts you about the discharged debt, they are violating the discharge injunction (11 U.S.C. 524). This can result in contempt of court and damages. Keep your bankruptcy discharge papers and show them to any lender who contacts you about a discharged debt.
Frequently Asked Questions
Can I include multiple payday loans in one bankruptcy?
Yes. All of your payday loans, credit cards, medical bills, and other unsecured debts can be included in a single bankruptcy case. There is no limit to the number of debts.
Will the payday lender try to block my discharge?
Very rarely. Payday lenders almost never appear in bankruptcy cases because the amounts are too small to justify legal fees. The discharge proceeds automatically in the vast majority of cases.
Can I file bankruptcy even if I owe less than $1,000 in payday loans?
Yes. There is no minimum debt amount to file bankruptcy. However, the cost of filing (roughly $338 filing fee plus optional attorney fees) may exceed the debt amount. Consider whether simpler solutions like an EPP or negotiation make more sense for very small amounts.
Check your bankruptcy discharge eligibility with our free screening tool.
Free Discharge Screener