The simple answer to this question is yes and you must include payday loans in your bankruptcy filing if you have them. A debtor signs his or her bankruptcy petition under penalty of perjury which is a verification that those persons or companies to whom the debtor owes money have been listed as a creditor. Failure to list the payday loan can result in a finding that the bankruptcy has been filed in bad faith and the case can be dismissed, or worse, that the debtor has committed bankruptcy fraud by failing to list and can be subject to federal prosecution.
Payday loans are a scourge upon humanity, in my opinion, due to the egregious amount of interest charged for the loans. However, I completely understand why clients who come into my office have resorted to such loans. These folks have been backed into a corner and feel they have very few reasonable alternatives to dealing with their debt. As a result, they will give the payday lender a check to hold made payable in an amount they know they do not have the funds to cover. And here is the troubling part….the payday lenders know this too. The payday lenders prey upon people in this situation not only in the amount of interest charged for these loans but also in the manner in which the lenders collect on this type of debt. If the customer fails to pay the interest on a payday loan each time it comes due, the payday lender will present the check to the customer’s bank knowing full well the customer is unlikely to have the amount in their bank account necessary to cover the check. If the check is returned for insufficient funds, the payday lender will attempt to have the customer prosecuted criminally for negotiating a worthless instrument. Many District Attorneys in the State of Alabama, but not all, refuse to allow the payday lenders to use the worthless check units in their offices for the purpose of collecting on these checks. The reason is because this is collection of a debt not a check that was written in return for goods or services.
Deceitful Collection Practices
If the payday lender is not allowed to pursue a bad check criminally, it will next resort to sneakier tactics to collect the debt. Often the payday lender will simply send the request for payment in the form of an ACH debit instead of presenting the actual check. If the customer has stopped payment on the payday check in an effort to prevent the collection, the payday lender will reduce the amount of the ACH debit by a penny or two so that it no longer matches the amount of the stop payment. The payday lender hopes this will sneak through the customer’s account as a result. If the customer closes the bank account, the payday lender will often seek to prosecute on the basis the check was written on a closed bank account.
All of these collections efforts by the payday lender cause turmoil and anxiety for the customer who, as I said at the beginning, sees no reasonable alternative in dealing with this type of debt. Filing for bankruptcy relief under Chapters 7 or 13 provides an extremely effective tool for dealing with payday loans. The automatic stay in bankruptcy gives the client breathing room to deal with these types of debt either through orderly repayment in a Chapter 13 or discharge in Chapter 7. If you are struggling with payday lenders and would like to explore how a bankruptcy option can help ease the anxiety of dealing with these types of creditors, please contact one of our locations nearest you for a free, confidential consultation with one of our experienced, licensed attorneys.