That depends on whether you file for Chapter 7 bankruptcy or for Chapter 13 bankruptcy. Usually speaking, a payday loan will be processed as unsecured debt. This means that in Chapter 7 bankruptcy, these loans will almost surely get discharged. In Chapter 13 bankruptcy, however, you will probably have to pay some of this debt off before the rest of it can get discharged. That being said, in whatever bankruptcy you pursue, a payday loan lender could object to the discharge. Read on to learn the unique complications that can arise if you have unpaid payday loans upon entering bankruptcy.

Recent Cash Advances: A Creditor Could Fight the Debt Discharge

If your last cash advance loan took place within 70 to 90 days before you filed for bankruptcy, then the lender could object to your getting this debt eliminated through a discharge. Because the loan was taken out so soon before bankruptcy, the creditor might claim that you never meant to pay back that loan, and you should not get relief from that debt.

The good news: most payday lenders do not win this challenge. Typically, a bankruptcy court is going to put the burden of proof on that lender to show that you committed fraud. Usually speaking, if someone files for bankruptcy who has a pattern of taking out cash advances, then a court will not believe the accusation of fraud. Of course, some payday lenders do win their argument and can thwart the discharge. And even if they do lose, you will also lose time because of the lender's challenge. Here a couple of ways you can simply bypass all this needless headache:

• Put off bankruptcy filing until more than 90 days have passed since you last took out a payday loan, or
• File for Chapter 13 bankruptcy, and include paying off this debt as part of your repayment plan

Problems with Post-Dated Checks

If someone files for bankruptcy, this starts what's known as the "automatic stay", and it means that creditors cannot collect from you until after the bankruptcy is over. So what happens if a payday lender tries to cash in a post-dated check after your bankruptcy (and thus automatic stay) have started? That creditor could be in violation of the automatic stay if they knew you had filed for bankruptcy. This means that a bankruptcy court may tell the creditor to give the money from that check back to the trustee who is managing your bankruptcy.

Further problems can arise if the payday lender wants to charge you with writing a bad check. While this accusation create needless stress, this action is illegal according to the laws of most states, and often goes against federal laws covering fair debt collection practices. Oh, and this is against the rules of the automatic stay too. (In fact, bankruptcy or no, many states have laws that make it illegal for a payday lender to accept post-dated checks.)

Protect Your Rights

You have numerous defenses under the law. You need to understand your legal rights and how to assert them. When you face difficulties with creditors, debt, or bankruptcy, you can turn to an experienced bankruptcy attorney who holds the answers on how to move on to a better financial future. Learn what creditors are not allowed to do when collecting debt, what debt relief actions you qualify for, what to expect from life after bankruptcy, and more, when you find the right bankruptcy lawyer. Do not wait. You can find the legal counsel you need and deserve on your directory today!