Overland Park Bankruptcy Attorney

Payday loans are extremely high-interest, short-term loans that are targeted to people who have an immediate need for a loan.  Are these loans treated any differently in bankruptcy from other debts?  Are the threats and harassment from these companies to be taken seriously?  Persons filing bankruptcy with payday loan debt need to be aware of several issues when it comes to payday loans.

First, payday loan companies are creditors like any other,and their debts will be discharged like any other unsecured creditor or signature loan.  However, there are some special nuances to these types of creditors that you should be aware of, so that you can better protect yourself.

First, be aware that the automatic stay applies to payday loans companies like any other creditor.  Once a case is filed, they cannot harass, sue, or take any collection activity against a debtor.

Second, before a bankruptcy is filed, know that payday loan companies often ask their customers to provide them with a check which they hold as their high-interest loan is being paid.  If the debtor defaults on the loan payment, some companies will try to send the check to the bank so that it bounces.  Then the loan company can try to refer the bounced check to a prosecutor’s office.  However, prosecutors rarely, if ever, commence prosecutions for such bounced checks.  They are almost always treated as civil matters, not criminal.

However, if a person completely closes out their bank account, and the check is returned, some prosecutors may initially view this as different from just a regular check bouncing for insufficient funds.  Even in such situations, most prosecutors, when made aware of a bankruptcy filing, are willing to drop the matter.  We have seen this happen over and over again. The bottom line is that prosecutions for payday loan “checks” in bankruptcy almost never happen.  Local prosecutors have more important things to do than act as collection agencies for payday loan companies.  This is another one of those areas that involves an interplay of bankruptcy law and criminal law, and we at Phillips & Thomas LLC practice in both areas.  If you are faced with such an unlikely situation, please give us a call.

Finally, any payday loan company trying to do any collection activity at all–including referring a bounced check to a prosecutor–may be in violation of the automatic stay.  Bankruptcy judges will punish creditors for such misbehavior.  If you are being harassed or badgered by a payday loan company, do not worry.  Call us now.  You have the final say in the matter with a bankruptcy filing.  Payday loans companies are a creditor like any other, and have far less power than they appear to have.

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