The answer is no. It is a loan. Check advance companies are regulated under the Deferred Presentment Services Act. Unfortunately, debtors often times become desperate for quick money and turn to check advances to make it to the next week.
Check advance companies have debtors write a check payable on a future date and in return are given a loan with the anticipation the loan will be paid back before an agreed upon date. But, pursuant to the Deferred Presentment Services Act, the check cannot be presented more than 31 calendar days from the date of the check. If the loan is not paid back by the agreed upon date, the check advance company can run the check through to be cashed. This can sometime cause havoc. Lack of can lead to bank fees for insufficient funds, it can also cause a mortgage or car loan payment to bounce. Because a check is written for the Check Advance, many of our clients believe they will go to jail for a “bad check” charge if they do not renew the check or cause the check to bounce.
Check Advances Can Be Discharged in Bankruptcy
The good news is that check advances are loans and can be discharged in your bankruptcy. As a warning to debtors, though, even if these loans are included in your bankruptcy whether it is a chapter 7 or a chapter 13, if you do not do a stop payment on them or close the bank account, the checks can be presented for payment by the Check Advance Company. This can cause your account to become overdrawn or wipe out the funds in the account. Although the automatic stay remains in effect during the bankruptcy case, there is an exception under 11 U.S.C. §362(b)(11) that allows the presentment of a negotiable instrument (such as a check) and the giving of notice of and protesting dishonor of such an instrument.
If you have one or several check advances outstanding and cannot pay them or find yourself going from one to another renewing the checks, but never getting them paid off, call to make an appointment for a free consultation at one of our Bond and Botes locations to discuss your options. We can help!
Heather Ellis Banks is an Associate Attorney at the Bond & Botes Law Offices in Knoxville, Tennessee. She holds a Bachelor of Science from the University of Tennessee Knoxville, and a Juris Doctorate from the University of Memphis, Cecil.C. Humphreys School of Law. She has been helping consumers to navigate through the bankruptcy process since 2005. Read her full bio here.