When a person is so deep into debt that his debts outweigh his assets, he may wish to declare bankruptcy. Although bankruptcy will cause his credit rating to drop sharply and may lead to the seizure of some of his assets, the debtor will enjoy a number of legal protections after he files. Not the least of these is the protection against calls from creditors seeking payment on loans, including payday loans.
Payday Loans
Payday loans are loans that are provided for a short period of time at a rate of interest that is exceedingly high. Sometimes, the rate of interest on a payday loan will approach 400 percent annually. When a person is late paying back a payday loan, the lender may tack on a number of late fees. If a payday loan is not paid, the debt may grow to many times the size of the original loan.
Bankruptcy Protections
If a person files for bankruptcy -- even for the bankruptcy is eventually rejected -- she is immediately protected by a number of different actions from creditors. These protections are enshrined in federal law and apply to all 50 states. These include protections from wage garnishment, tax levies, repossession, foreclosure, lawsuits and calls from creditors. If a creditor violates this protection knowingly, he may face civil penalties.
Calls From Creditors
After a person has filed bankruptcy, a creditor is not allowed to make any kind of contact with the filer; this includes payday lenders. A lender is not allowed to even contact the debtor to ask him if he would like to settle his debt. If the person has filed chapter 7 bankruptcy, the payday debt will likely be dismissed. If he has filed chapter 13, it may be paid as part of a reorganization of the filer's finances.
Considerations
A person only receives the protection of bankruptcy while his case is still active. If a judge decides that a person is not legally eligible to file for bankruptcy, then the bankruptcy filing is dismissed. If this happens, then the person is once against on the hook for his payday loans. At this point, the creditors can begin to call again.
0 comments:
Post a Comment