The Short Answer
Yes, payday loans can generally be wiped out by filing bankruptcy — they're treated much like credit card debt. In a Chapter 7, they can be discharged entirely; in a Chapter 13, they're typically paid back at pennies on the dollar alongside other unsecured debts. The critical factor is timing: if you took out a payday loan within the last 90 days before filing, the court may presume fraud, which could require you to repay that debt in full. Waiting at least 90 days after receiving a payday loan before filing gives you the cleanest path to discharge.
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There isn’t really a straight answer to that question. Generally speaking, yes, payday loans can be wiped out by filing bankruptcy.
A payday loan will be viewed very similarly to credit card debt. Therefore, it can be wiped out through a Chapter 7 bankruptcy or mostly wiped out in a Chapter 13 bankruptcy. The key thing to look at is when the payday loan was received.
Like credit card debt, or any other debt, if you received the loan within the last 90 days there will be a presumption of abuse, or fraud, by the courts. If a debt is incurred and viewed as fraudulent then the debtor is required to pay back that debt in full. Therefore, it is important to wait at least 90 days before filing a bankruptcy after receiving a payday loan. You may need to wait even longer depending upon the amount of the payday loan.
A common tactic that payday loan companies will use is to have the person seeking the loan write a post-dated check for a certain amount. They do this so that if a person doesn’t pay the loan back they can attempt to cash the check and there will be non-sufficient funds available. The payday loan company can then try to argue that you wrote them a bad check and they could attempt to press criminal charges against you. However, it is rare they will actually attempt to do that. One of the major reasons is because a check is only considered “bad” if the person writing the check gives the impression suitable funds are in the bank to cover the check. The fact that you are post dating a check and doing so to a payday loan company makes it pretty clear you aren’t communicating that you have sufficient funds.
Once the bankruptcy is filed an automatic stay is in place that protects the payday loan companies from trying to collect on any money owed to them. However, they could attempt to press criminal charges for writing bad checks. As explained above, the chances of that are slim to none but you will want to make sure to consult with your bankruptcy attorney.
The bottom line is, payday loans may be wiped out or lessened by filing for bankruptcy but consult with a Charlotte, NC bankruptcy attorney or Greensboro, NC bankruptcy attorney to make sure you file the bankruptcy at the right time.
Key Takeaways
- Payday loans are treated as unsecured debt — just like credit card balances — and can be discharged in both Chapter 7 and Chapter 13 bankruptcy.
- Loans taken within 90 days of filing trigger a presumption of fraud or abuse, which can force full repayment of that specific debt.
- Filing bankruptcy triggers the automatic stay, immediately halting any collection attempts by the payday loan company.
- Post-dated checks written to payday lenders rarely lead to criminal bad-check charges, because the lender clearly knows sufficient funds may not be present — that's the nature of the transaction.
- The larger the payday loan amount, the longer you may need to wait before filing to avoid the fraud presumption.
- Consult a bankruptcy attorney before filing to time your case correctly and protect yourself from any potential complications with payday lenders.
Attorney Insight
The mistake I see most often is someone getting a payday loan to cover bills, then filing bankruptcy two or three weeks later thinking it'll all go away — and that's exactly when we have a problem. That loan taken within 90 days is going to get scrutinized, and if the trustee or the lender successfully argues fraud, you're paying that one back in full no matter what else gets discharged. Payday lenders also like to rattle clients with threats about bad check charges, but in 28 years I've almost never seen that actually go anywhere — a post-dated check written to a payday lender simply doesn't meet the legal standard for a bad check in North Carolina. The real danger isn't criminal charges; it's filing too soon and losing the discharge on that specific debt.
