For those struggling financially and with debt, a payday loan or short-term loan can be a tempting offer for quick cash to tide you over until your next paycheck. For many Arizonans, payday loans can be a quick fix that turns into a long-term financial nightmare. For those with payday loans who are researching bankruptcy options, you might be wondering if you can file bankruptcy on payday loans.
In this blog, the Arizona bankruptcy attorneys at Lerner and Rowe Law Group explain how filing bankruptcy can help you escape the trap of payday loans.
What Is a Payday Loan?
Payday loans are a type of short-term, high-interest loan and are typically due on your next payday. They are often marketed to people who have bad credit or no credit at all, and they can be a tempting option if you need quick cash for an emergency.
Payday loans in the traditional sense have been illegal in Arizona since 2010. However, there are other types of loans that are available in the state that are similar. The term “payday loan” is broad and can apply to various short-term, high interest loans. According to Arizona revised Statutes, lenders providing loans similar to the traditional payday loan must adhere to the following:
- For a loan amount of $3,000 or less, the maximum finance charge is 36% of the loan amount
- For a loan amount of more than $3,000, the licensee may choose to apply either of the following two options:
- Option (a): A 36% finance charge on the first $3,000 of the loan amount, and a 24% finance charge on the remaining amount.
- Option (b): A single blended interest rate that is calculated based on the total amount of finance charges that the licensee would receive if option (a) were applied.
Some traditional payday loans have an interest rate of 400%. The interest rate required by Arizona law is much lower than traditional payday type loans. Still, the costs of these loans can add up quickly. The high interest rate further contributes to mounting debt. As these lenders prey on those who are struggling financially, it is not uncommon for individuals to file bankruptcy on payday loans.
Payday Loans in Arizona
The types of payday loans currently available in Arizona can have higher interest rates than a personal loan from a bank or even a traditional credit card. When filing bankruptcy on payday loans, these types of loans are often included in the client’s debts. Common types of payday loan options can include flex loans, installment loans, auto title loans.
Flex Loans
This is a line of credit that allows you to borrow money up to a certain limit. You can repay the money you borrow at any time, and you only have to pay interest on the amount of money you actually use.
Installment Loans
A type of loan with fixed monthly payments and interest rate over a set period. Installment loans typically have lower interest rates than flex loans. These are often for a larger amount than payday loans.
Auto Title Loans
These loans use your car’s title as collateral. The amount you can borrow depends on the value of your car. Defaulting on the loan could lead to your car being repossessed.
These are just a few of the types of payday loans available in Arizona. Always remember the risks of taking out these loans. It is important to not take out loans you can’t repay. Sometimes, you might not have a choice if you are struggling financially and have urgent bills to pay. Taking out a payday loan with high interest rates will further add to the mountains of debt you might be struggling with. The good news is that you can file bankruptcy on payday loans with the help of an Arizona bankruptcy attorney from Lerner and Rowe Law Group.
Filing Bankruptcy on Payday Loans in Arizona
Luckily, payday loans are considered a dischargeable debt when filing Chapter 7 bankruptcy. This means that you do not have to repay the debt after filing. Along with payday loans, other types of debts dischargeable in Chapter 7 include:
- Credit cards
- Past due utility bills
- Medical bills
- Personal loans
If you are filing Chapter 13 bankruptcy on payday loans, they can also be discharged depending on your agreed upon repayment plan with the court. This means you may only have to pay a portion of the original balance. After successfully completing your Chapter 13 plan, any remaining eligible debt, like payday loans, will be discharged.
Contact an Arizona Bankruptcy Attorney
Don’t let payday loans control your life. Our Arizona bankruptcy attorneys have helped hundreds of clients file bankruptcy on payday loans, relieving them of the crushing debt and allowing them to have a fresh, financial start. Stop struggling and watching your debt grow. Instead, schedule a free consultation with one of our bankruptcy attorneys. We offer flexible, affordable payment plans for our clients.
To schedule, call us at 602-667-7777. You can also reach us by LiveChat, or request your free case review by completing this secure online form.