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How Bankruptcy Can Provide Relief from Payday Loans

 Posted on July 08, 2024 in Bankruptcy

Dallas bankruptcy lawyerAre you struggling with payday loan debt in Texas? You are not alone. Many people find themselves trapped in a cycle of borrowing and repaying these high-interest, short-term loans. However, there is hope. Bankruptcy can offer a path to financial relief and a fresh start. A Texas lawyer can help you explore how bankruptcy can help you break free from payday loan debt and regain control of your finances.

Payday Loans are Dischargeable in Bankruptcy

One of the most important things to understand is that payday loans are generally dischargeable in bankruptcy. This means that when you file for bankruptcy, you may be able to eliminate your obligation to repay these loans. Both Chapter 7 and Chapter 13 bankruptcy can offer assistance with payday loan debt.

In a Chapter 7 bankruptcy, also known as "liquidation bankruptcy," your payday loan debt can be completely wiped out along with other unsecured debts. This process typically takes 3-4 months and allows you to start fresh without the burden of these high-interest loans.

Chapter 13 bankruptcy, often called "reorganization bankruptcy," allows you to create a repayment plan over 3-5 years. During this time, you may be able to pay off a portion of your payday loan debt while the remainder is discharged at the end of your plan.

The Automatic Stay is an Immediate Relief from Creditors

When you file for bankruptcy in Texas, an "automatic stay" goes into effect immediately. This legal protection prohibits payday lenders and other creditors from continuing collection activities. They cannot:

  • Call you to demand payment
  • Send collection letters
  • File lawsuits against you
  • Garnish your wages
  • Withdraw funds from your bank account

The automatic stay provides immediate relief and breathing room while you work through the bankruptcy process.

Rebuilding Your Credit After Bankruptcy

While bankruptcy will impact your credit score initially, it also provides an opportunity to rebuild your credit without the burden of overwhelming debt. After discharging your payday loans through bankruptcy, you can focus on:

  • Making timely payments on remaining debts
  • Obtaining a secured credit card to establish a positive credit history
  • Monitoring your credit report for errors
  • Gradually applying for new credit as your financial situation improves

Many individuals find that their credit scores begin to recover within 1-2 years after bankruptcy, especially if he or she practice responsible financial habits.

Potential Challenges With Recent Cash Advances

It is important to note that cash advances taken shortly before filing for bankruptcy may be scrutinized more closely. In Texas, as in other states, cash advances totaling more than $750 taken within 70 days of filing may be presumed to be non-dischargeable fraud. However, this presumption can be overcome by demonstrating that you had a genuine intent to repay at the time of borrowing.

Let a Dallas, TX Bankruptcy Attorney Help You With Your Payday Loan Challenges

Every financial situation is unique, and the best course of action depends on your specific circumstances. That is why it is helpful to seek the help of a Fort Worth, TX bankruptcy lawyer. Call Acker Warren P.C. at 817-752-9033 to schedule your free consultation and learn how bankruptcy may provide the relief you need from payday loans.

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