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Beware: Payday Loans Often are Not Dischargeable in Bankruptcy

In debt? Mortgage, car loans, credit cards and maybe even some payday loans? Well, don’t think bankruptcy necessarily will be a way out – at least not for the payday loans.

Payday loans, also known as “payday advances,” “cash advances,” and “short term personal loans,” have become wildly popular in a bad economy for their ease-of-approval (even with bad or over-extended credit) and speedy delivery (often within 24 hours).

But unlike other unsecured debt (e.g,. credit cards), they often cannot be easily discharged in either a Chapter Seven or Chapter 13 personal bankruptcy, according to Michael S. Anderson, an Arizona attorney.

Why payday loans may or may not be dischargeable in bankruptcy

Debts taken on immediately (60-90 days) before a bankruptcy are traditionally held by the courts to have been taken in anticipation of declaring bankruptcy. In other words, you knew you were going to file the bankruptcy but took out the loans anyway, with no intention to repay.

And because these loans usually “renew” themselves every month (for example, if you do not pay the full amount due, but the smaller “service fee” instead, to avoid having to make full repayment at that time), even a loan that you have been paying on for months might be considered by a judge to be “new” because the date of the most recent “re-borrowing” is within the immediate recent period.

But how do you get out from behind the eight ball?

“I have six loans that I’ve been juggling for months,” said Jill Jensen of Rocky River, Ohio. “I just can’t keep this up because even though I’m making the payments it seems like I’m getting nowhere at knocking down the debt.”

No wonder she’s “getting nowhere”: the Federal Trade Commission reports that payday lending firms charge interest rates anywhere from 391 to 980 percent.

Take heart, many courts are coming around

According to the TheBankruptcySite.org, because these high-interest loans often are viewed as abusive, many courts will look not at the most recent renewal date, but the date at which the string of loans began in order to inform their decisions on whether to include them in the bankruptcy. In other words, in order to discourage these usurious practices on the part of the predatory lenders, the judges will allow the loans to be included in a bankruptcy.

Whatever your situation, an experienced bankruptcy attorney will best be suited to advise you regarding this matter and the nature of the law regarding this in your geographic area. In any case, payday loans remain a gamble – one from which you might or might not be able to recover in personal bankruptcy law.

Personal Credit Repair – You Can Do It

In this credit repair article, I am going to give you a step by step method of repairing your credit. You can of course, hire someone to do this sort of thing for you, but you can also accomplish this yourself just as easily.

Order your credit reports: You need to order credit reports from all three locations: TRW, Trans Union, and Equifax. Your credit should get reported to each, but not always. This ensures you can review each item on each report for discrepancies.

Organize yourself: This will be set up to track your correspondence with the credit agencies. You should have a file cabinet, folders, and a copy of the credit reports (try not to write on the originals). Make a copy of everything before you mail it out and place it in a folder.

Analyze your credit report: Each report will have codes associated with the items. These codes stand for something against your credit. If you have one or more of these codes, this will have a negative impact on the credit rating. Highlight these in a highlighter for reference later.

Write your disputes: Do not use a form letter, or any type of generic letter you find in the latest books out. These are spotted right away, and will draw undo attention to your requests. Do not lie in your dispute, and always state you are challenging the item as “not mine” or “not late”. You would also like to tell the agency your required outcome of this dispute. Do not sound like an expert, or repeat something you read in a credit repair article. This may get your information rejected by the checker before it even has a chance.

Send in your dispute: Once you have a decent typed letter about your dispute, send it in. By law, the credit agency must investigate all disputes, which are deemed irrelevant or frivolous. This is why you need to get past the checker person.

Get a response: You will get some sort of response. It can be anything from your dispute is now being investigated, to a letter asking for more information, to a rejection letter based on timing, or even a rejection letter based upon the fact the credit bureau believes you are trying to manipulate the system. Depending on this letter, will determine what is done next. If you do not get a response at all after 60 days, write another dispute.

See results: Get another copy of your credit reports and compare this against your original reports. You should see a difference. There will be updates to the items you disputed, or the items may be gone completely. Ensure you agree with the comments of the credit bureau.

Settle any unpaid debts: If you still have any unpaid debts, you should really try to settle these. This is a good indication to the credit bureaus you are making a substantial effort to clean up your credit.

The above list is a good legal way of helping to repair your credit. I put together this credit article to show you there are some free methods of returning your credit rating back to normal. If you need to refer back to this credit repair article for the steps, feel free. It will definitely guide you in the path to getting your credit repaired.