Recently, payday loans are becoming very popular.
Typically, a payday loan (creditor) requires the borrower to approve the creditor’s right to withdraw funds directly from the borrower’s bank account.
At some point, after borrowing additional funds, the cost of the loan, including interest and fees, may spiral out of control. Thereafter, the creditor may continue to withdraw more and more funds out of the debtor’s bank account, which is unmanageable. In the event that payments are not timely paid, the creditor’s representatives’ communications may be harassing and unrelenting. At this point, the borrower may look for bankruptcy relief.
Typically, a payday loan is an unsecured loan that may be discharged like any other unsecured (ie. credit card) debt, assuming the borrower meets the necessary bankruptcy criteria. Also, immediately upon the bankruptcy filing, the Payday loan creditor is prohibited from collecting the debt, which means that the creditor may not withdraw any funds from the debtor’s bank account.
Robert Manchel, a NJ bankruptcy attorney, will answer your bankruptcy questions at 1(866) 503-5655. Schedule a free consultation to learn how bankruptcy protection may be applied to your personal situation.
Disclaimer: The above information is based on my experience in communicating with a number of people. Obviously, the manner in which creditors handle their collections varies. I am not suggesting that any creditor is acting in a manner that is illegal and/or unethical.