It is pretty common for those who are considering bankruptcy to have taken
out one or more payday loans in the past. Payday loans, also called cash
advance loans, are small loans that are meant, in theory, to be paid off
by the time the borrower receives their next paycheck.
Here’s how it works: the borrower goes to the payday lender and provides
them with some sort of proof of employment, and then gives the lender
a check, postdated, for the amount they wish to borrow plus a fee for
interest. The lender then provides the borrower with the amount requested
and holds the check until the borrower’s next payday. When the loan
becomes due, the lender simply deposits the check. If the borrower needs
the money for something else by the time the next payday rolls around,
the lender may agree to hold the check for another pay period for an additional cost.
Sounds simple, right? The problem is, borrowing money this way can be quite
expensive, potentially costing nearly 400 percent in interest in certain
cases. But what happens if you take out a loan and then find you can’t
pay it back?
Here’s what can and cannot happen:
can call you repeatedly and relentlessly in pursuit of payment.
can overdraw your checking account if they have the authority to automatically
can sue you for the amount of the loan, as well as attorney fees and court costs.
can turn the debt over to a debt collector.
can garnish your wages once they have a judgment.
can’t put you in jail. This is because they know when they accept a check that
the funds are not in the borrower’s bank account. Therefore, it
is unlikely that you’ll be found guilty of knowingly writing a bad check.
Payday loans are usually used as a last resort and are a sign than an individual
is in a bad financial situation. If you have relied on payday loans in
the past and are considering bankruptcy, please have your case evaluated
by a Chicago bankruptcy lawyer at Sulaiman Law Group, LTD. After reviewing
your financial situation, we can help you understand your options for
freeing yourself from debt and regaining your financial health.
Contact us today to set up an appointment.