When you file for bankruptcy protection, you are required to claim all of your unsecured debts. Bankruptcy, however, does not allow the debtor to claim outstanding pay day loans in their filings. Although these loans may be considered small personal loans, they are not viewed as unsecured debts.

What Exactly Is A Pay Day Loan?

Pay day loans, which are often referred to as cash advance loans, are a unique type of lending instrument that has gained popularity in the last 10 years or so. In most cases, the borrower does not have to be approved to receive a loan. The borrower must simply provide proof of income to qualify.

Because these loans must be repaid in less than 30 days, they do not fall under the regular banking regulations that other small personal loans do in the finance industry. In addition, because these loans are backed by a personal check, or your next pay check, they are technically a secured loan. Since these loans are secured by your next pay check, or the fact that you have left a personal check at their business for deposit in the event you do not repay, they will not qualify as unsecured debts in the bankruptcy court.

What Should You Do If You File Bankruptcy And Have Outstanding Pay Day Loans?

There are several options for people that are in this scenario. If you are using a lawyer to file for bankruptcy, you should discuss your options with them before filing. You may need to file bankruptcy under a different chapter to eliminate these debts. You may also be able to make an arrangement with the pay day lender to repay the debt through instalments. While this is unusual, they may make an exception under the circumstances.

Your third option is to enter into a pay day loan consolidation program. It should be noted, however, that this consolidation program will not qualify for bankruptcy protection. This type of program will only allow you to repay your loans in a manner which you can afford.

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