Payday loans have the potential to cause serious financial problems for anyone regardless of their financial situation. This is likely the primary reason 15 states have banned payday loans. Prior to 2016 Utah law had the fewest restrictions on payday lenders in the country. Excessively high interest rates charged by payday loans may create financial difficulties with devastating effects on a household’s ability to pay their monthly debts. In some situations, filing bankruptcy may be the easiest and best solution.
In 2020, despite the Utah legislature imposing more limitations on these types of loans, interest rates on Utah payday loans averaged an astronomical 522.26% annually or $10.02 for a $100 loan for seven days. While tougher laws and greater oversight have rid the state of some of its worst payday lenders, the exorbitant interest rates presently charged by payday loans still have the potential to cause great damage to any Utah resident’s financial situation.
Payday loans are typically personal unsecured loans. These types of debts may be discharged in Chapter 7 or Chapter 13 bankruptcy cases. Filing a bankruptcy case triggers the automatic stay, a mechanism created by federal bankruptcy law that acts as a bar to a creditor collecting a debt. It may be discharged in bankruptcy, which means the debtor is obligated to repay it.
Any bankruptcy debtor who has taken a loan knowing he or she is on the verge of filing bankruptcy may be guilty of fraud. Federal bankruptcy law presumes a debtor was contemplating the filing of a bankruptcy case for a few months before actually filing the case. Thus, payday loans taken within 90 days of filing a bankruptcy case may allow a lender to enforce the terms of the loan. Therefore, it is a good idea to wait at least 91 days after obtaining a loan before filing bankruptcy.
For many people, bankruptcy may be the best option to find relief from overwhelming payday loan debt. Some situations are such that filing a bankruptcy case may be the only option for relief from a predatory payday lender. Bankruptcy can help anyone rid themselves of burdensome unsecured obligations such as credit card debt and medical bills. Payday loans are just another type of unsecured debt (nonpriority unsecured debts) and may be discharged in bankruptcy.
Theron Morrison has helped 8,000 people, including many people with payday loans, file bankruptcy and gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.