Myths & Facts About Payday Loans
It is pretty common for those who are considering bankruptcy to have taken out one or more payday loans in the past. Payday loans, also called cash advance loans, are small loans that are meant, in theory, to be paid off by the time the borrower receives their next paycheck.
Here’s how it works: the borrower goes to the payday lender and provides them with some sort of proof of employment, and then gives the lender a check, postdated, for the amount they wish to borrow plus a fee for interest. The lender then provides the borrower with the amount requested and holds the check until the borrower’s next payday. When the loan becomes due, the lender simply deposits the check. If the borrower needs the money for something else by the time the next payday rolls around, the lender may agree to hold the check for another pay period for an additional cost.
Sounds simple, right? The problem is, borrowing money this way can be quite expensive, potentially costing nearly 400 percent in interest in certain cases. But what happens if you take out a loan and then find you can’t pay it back?
Here’s what can and cannot happen:
- Lenders can call you repeatedly and relentlessly in pursuit of payment.
- Lenders can overdraw your checking account if they have the authority to automatically withdraw money.
- Lenders can sue you for the amount of the loan, as well as attorney fees and court costs.
- Lenders can turn the debt over to a debt collector.
- Lenders can garnish your wages once they have a judgment.
- Lender’s probably can’t put you in jail. This is because they know when they accept a check that the funds are not in the borrower’s bank account. Therefore, it is unlikely that you’ll be found guilty of knowingly writing a bad check.
Payday loans are usually used as a last resort and are a sign than an individual is in a bad financial situation. If you have relied on payday loans in the past and are considering bankruptcy, please have your case evaluated by a Chicago bankruptcy lawyer at Atlas Consumer Law After reviewing your financial situation, we can help you understand your options for freeing yourself from debt and regaining your financial health. Contact us today to set up an appointment.