How Do I Get Out of Payday Loan Debt?

How Do I Get Out of Payday Loan Debt?

Payday loans are often the loans of last resort for people struggling to pay their debts and for life’s necessities, so if you have one of these loans, you may wonder, how do I get out of payday loan debt? If that’s your situation, other than paying off the debt, there are limited options that may allow you to change when and how much you pay back. If this debt is one of many dragging you down, you should consider filing for bankruptcy protection to give yourself a fresh financial start.

The Adam Law Group helps those in financial trouble. You have legal rights. The payday lender has many legal protections, but that doesn’t mean they can abuse you or break the law when seeking repayment. If you’ve taken out a payday loan and want to know your options, call us at 904-329-7249.

What is a Payday Loan?

Easy to get, but it may be difficult to pay back.

Florida payday loans are short-term loans for up to $500. You’re expected to repay with your paycheck or another regular income source such as a pension or Social Security. Under state law, the maximum fee is ten percent of the amount borrowed plus a $5.00 verification fee. This amount, calculated as an annual percentage rate, often ranges from 200 to 500 percent. The time you have to repay it (the loan term) can be from seven to 31 days. You can have only one outstanding payday loan at a time. You must pay a loan in full and wait 24 hours before getting another.

Given the profits that can be made, qualifying is relatively easy, so the lender can make as many loans as possible. Usually, the debtor must show proof of income and meet other qualifications. In most cases, the lender won’t run a credit check but will want to know if you have a bank account, a working phone number, a government-issued photo ID (like a driver’s license), and a Social Security number.

How Does a Payday Loan Work? What Happens if I Don’t Pay it Back?

An unpaid debt could go to a collection agency, and you could end up in court.

You would give the lender a check to pay off the debt. The lender keeps the check until payment’s due, but if it doesn’t clear, or you’re unable to pay, the lender can’t seek criminal charges for writing a bad check. You could be charged the 10% fee, the $5 cost, and bad check fees charged by your bank.

If you can’t pay the loan in full, the loan provider can give you a 60-day grace period without making additional charges. To get this, you must make an appointment with a consumer credit counseling service within seven days of default and finish your financial counseling within this 60-day period.

If you default, your debt could be turned over to collections, hurting your credit record and lowering your credit score. This may make it harder for you to borrow money in the future, or you may be charged a high interest rate. If the lender or collection agency sues you, the court could impose additional costs, but the lender can only seek interest on the amount up to Florida’s judgment rate (4.25% per year).

Can I Close My Bank Account to Stop Payday Loans?

How do I get out of payday loan debt? Not by closing your bank account.

You could close your bank account after issuing the lender the check, but that won’t solve your problem – your inability to pay your debt. The lender won’t give up and go away if you’re account is closed.

How Do You Get Out of a Payday Loan Nightmare?

You may be able to get more time and lower payments to put the debt behind you.

What are your options if you don’t pay off the loan when it’s due?

  • You may ask the lender for an extended payment plan. This should allow repayment over a longer time. The lender may prefer this to selling the right to collect the loan to a collection agency
  • If you have other outstanding debts, you could seek a loan to cover them all. Ideally, this would be at a lower interest rate and make life simpler because you’re making one payment, not several. It will also allow you to plan ahead and budget, with lower payments but at a higher cost because there will be more of them over time. You’ll be subject to a credit check, and you’ll be obligated to pay the loan back. This loan won’t solve your financial problems if you continue to add new debts and loans.
  • You could go to a debt counseling service to get that grace period and a debt management plan (DMP). You and a certified credit counselor would create a budget and debt repayment schedule. The counselor may negotiate with your payday lender and other creditors to accept less than what you owe. You would have to close your credit card accounts and will hurt your credit record, making future borrowing more difficult and or more expensive

Even though these approaches don’t involve legal action, you should contact the Adam Law Group before taking these steps. You should know your rights, how these efforts will impact you, and how to protect your interests.

Should I Go Into Bankruptcy if I Can’t Repay a Payday Loan?

Bankruptcy is worth considering if your payday loan is just part of what you’re facing.

Bankruptcy may be a good option if your overdue payday loan is just one of many financial problems. If your inability to pay a $500 loan (plus the fees) is the only money issue you’re having, the bankruptcy process won’t be worth what little benefit you’ll get.

Often those getting payday loans do so because they’re in serious financial trouble that won’t go away anytime soon. You may have maxed out credit cards, can’t keep up with car payments, have given up on paying back student loans, have substantial medical debt, and barely be able to pay your rent or mortgage. If this is your situation, or close to it, bankruptcy protection may be a way to get out of payday loan debt and other obligations.

The most common bankruptcy filings for individuals are:

1) Chapter 7

This involves selling your non-exempt assets to satisfy your creditors’ claims. It will result in a discharge of your debts, preventing any further collection efforts.

2) Chapter 13

This type of bankruptcy will put you on a path to restructure and pay your debts over a three- to five-year period. If you’re successful, you can keep assets like a house or car. If the plan becomes unworkable, your filing may convert to Chapter 7.

What Happens if You Never Pay Back a Payday Loan?

If you do that through bankruptcy, it will be on your credit record for seven to ten years. If you just don’t pay and you’re sued to collect the debt, you’ll have to pay the judgment unless you’re “judgment proof” (you have no assets and no income or income that can’t be garnished, like Social Security). It will heavily impact your credit report, probably making it impossible to get another loan. Under Florida law, you must pay off your current payday loan before you can get another.

Want Legal Help With Your Payday Loan? Count on Attorneys You Can Trust.

How do you get out of a payday loan nightmare? Your first step is to contact the Adam Law Group. We can discuss your situation, how Florida law would apply, and your best options to address your problems. Call us at 904-329-7249 to schedule your free consultation.