A quick look at the yellow pages or a search on the internet throws up a number of companies who are making money out of offering payday loans to people in need of cash. The way payday loans work is that the borrower writes a check for the amount borrowed plus the amount of the interest being charged, which is always ruinously high. The creditor holds the check and gives the borrower the agreed sum. So for example, a loan of $100 would mean handing over a check for $125.
If the borrower is able to pay that amount back in full when the next pay check comes in, the matter is resolved. But, unfortunately, it is usually the most vulnerable and in need that get trapped by this type of debt and as a result get caught up in an escalating cycle of debt and interest that is terrible to contemplate. Although the debtor makes small payments repeatedly, often weekly or fortnightly, to stop the lender attempting to cash the check, many debtors never actually reduce the principle. In extreme cases the actual interest rate could be as high as 1000% over a year.
This type of lending is discouraged by the federal government, is regulated in some states where the interest rates are capped and is actually illegal in some states. However, due to online services, some people do still get themselves into strife.
Debt and anxiety over the consequences of that debt too often cause people to try to deal with these unscrupulous lenders. Because the debtor has written and post-dated a check, the fear that this may be somehow illegal adds to the anxiety felt. However, it is not illegal despite what the lender may have implied or even claimed outright. A payday check is not a bad check. The lender and the borrower both know that there is no money in the bank when that check is written, so there is no intent to deceive.
Payday debts will be treated the same way as other debts in a bankruptcy procedure. One of the worst mistakes a debtor can make when filing bankruptcy is not declaring some debts especially payday debts, which are likely to be a tremendous burden. If a debtor tries to conceal the existence of payday debt out of fear and shame, that debt cannot be discharged.
However, declaring payday debt, because it is unsecured debt, means that it is likely to be part of the debt that is discharged under chapter 7 bankruptcy.
One word of caution here! Payday debt means that a creditor has a check and can decide to try and cash it. Even though an automatic stay is activated once bankruptcy is filed, it may be possible for the creditor to cash that check. To prevent this happening pay the necessary fees to have those checks stopped. Although, once protected by filing bankruptcy, you should be able to recover any money accessed this way, it would be a lengthy and possibly expensive process.
So the lesson learned here has to be, DO NOT conceal debt when filing bankruptcy in San Antonio, especially, payday debt.