Law Offices of Nicholas Gebelt

I’m In Debt To A Payday Loan Company Or Another Predatory Lender. I Can’t Afford The Payments. Can I File Bankruptcy For Relief From This Type Of Debt?


You can file for bankruptcy for relief from Payday loan debt, or debt with other predatory lenders.

If you go into bankruptcy to deal with the debt, you’re doing so because you’ve breached the contract. The vast majority of debts included in bankruptcy are breach of contract debts, which are typically dischargeable.

There is a notable exception to this rule. If the creditor can show that you defrauded it, then it can ask the bankruptcy judge to enter a judgment holding that the debt is nondischargeable. Fraud can be a little tricky in bankruptcy because there are multiple definitions of fraud.

One definition — with which you may be familiar — is: a debt is incurred through fraud if the debtor made a material misrepresentation that induced the creditor or lender to extend credit or lend money, which it wouldn’t have done if it had known the truth. However, this definition doesn’t come up very often in bankruptcy because the vast majority of people who file for bankruptcy are straight-shooting people who are in debt because of emergencies and misfortunes, like a job loss, a healthcare catastrophe, or a familial upheaval.

The more frequently used definition is: “Incurring debt with no intention of ever repaying it.” Most of the focus here is on relatively recent debt.

Thus, if a person racks up a bunch of new debt and declares bankruptcy shortly thereafter, the presumption is that the debtor didn’t intend to repay the debt at the time of incurrence.

Therefore, if a client has recently taken out a loan with a loan shark or other sort of predatory lender, we suggest aging the debt before filing for bankruptcy. We also urge the client to make a few bare minimum payments prior to filing the petition.

When enough time has passed and enough payments have been made, we file the bankruptcy petition. In waiting, we greatly reduce the likelihood of a challenge to the discharge of the debt. Exactly how many payments a person should make and how much time the debtor should wait before filing the petition depends on the facts of the case. This is the sort of thing we analyze at a first meeting. If you are in this type of situation, we will determine whether you should postpone filing, or if it makes more sense to file right away.

In sum, personal loans, Payday loans, and most other predatory loans can be discharged through bankruptcy, even if a little aging of the loans is necessary.

However, although your legal obligations may be discharged, there may be extralegal consequences of taking out a loan from an unscrupulous character. I once had two unrelated clients come to my office in the same week, each of whom had loan shark predatory loans. In both cases, the loan sharks were criminal entities. Both of these clients were afraid that they would be beaten or killed if they didn’t repay their loans. I had to tell them that while I could remove their legal obligation to repay the loans, there was nothing I could do about the criminal actions of the loan sharks.

This is all to say, you should be very careful if you’re going to get a loan from a predatory lender or loan shark. Ideally, I recommend never getting a loan from a loan shark, but if you are going to do so, it is imperative for you find out if it may use violence as a collection tool. You should never consider borrowing from someone who might kill you.

In addition, you should pay off Payday loans and Cashcall loans as quickly as possible. However, if you do get involved with them, we can get rid of those debts in bankruptcy. These types of lenders make enormous amounts of money by exploiting the most desperate people. They will never be looking out for your best interest, no matter what the slick, inviting, late-night TV commercials say, and no matter how nice or caring the employees seem when you speak to them. These people are predators and they’re going to squeeze you dry.

In sum, avoid loan sharks and avoid Payday loans and Cashcall loans. However, if you’ve already done so, we can fix it through a bankruptcy.

For more information on Bankruptcy In California, an initial consultation is your best next step. Get the information and legal answers you are seeking by calling (562) 777-9159 today.

Attorney Nicholas Gebelt

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