When you need emergency cash, payday-loan stores serve a valuable purpose. Not everyone has access to credit, savings accounts, and generous friends or relatives. Unfortunately, the financial situation that might lead to a payday loan can also lead to the need for a bankruptcy filing. When it comes time to list your creditors on your bankruptcy matrix, you may hesitate to list the payday loan. Bankruptcy should present filers with the opportunity to make a fresh financial start, so you want to include every possible debt for discharge. Read on to learn more about whether or not you can include a payday loan obligation in your chapter 7 bankruptcy filing.

Secured and Unsecured Debt

You should become familiar with these terms, since they pertain to what types of debts can be completely discharged without your suffering a loss of property and which ones could mean a loss.

1. Secured Debt: This is money you owe that is connected to property. The property is used as collateral, which means that the property may have to be surrendered to the bankruptcy trustee to help pay back the creditor. For example, if you have a home mortgage, the home itself is the collateral, and failure to pay back the loan as agreed could mean the loss of the home through either foreclosure or bankruptcy seizure.

2. Unsecured Debt: This is money you owe on credit cards and some types of personal loans. There was no collateral needed for these loans, and the creditor has no recourse to retrieve any property if you default on the terms. In general, all unsecured debt can be discharged with a chapter 7 bankruptcy filing.

Payday Loans

Unlike a title loan, a payday loan has no collateral to "back it up," therefore it falls into the category of unsecured debt and is nearly always eligible for inclusion on your bankruptcy filing. One issue that may arise when it comes to including this type of loan on your bankruptcy is the loan disclaimer.

The Disclaimer

You likely signed a heavy stack of paperwork on the day you committed to your payday loan, and you may have done so time and time again if you were unable to meet your loan repayments. Among those papers was very likely a disclosure stating that you would be unable to list this loan on any bankruptcy you may eventually file. This disclosure, which is required for the loan process, is not binding in any manner. Be very sure that a payday loan, no matter what you may have been forced to sign, can be included on your bankruptcy and is a fully dischargeable debt. The payday-loan industry hopes that you will fall for the threat and leave it off your petition, but do not do so!

Be sure to discuss this debt and all others with your bankruptcy attorney, such as one from O'Connor Mikita & Davidson LLC, to get the full relief that a chapter 7 bankruptcy is meant to give you.