Bankruptcy and Payday Loans

I am a bankruptcy attorney, so when I file a bankruptcy case I sometimes have to contact lenders to give them notice of the bankruptcy filing and to instruct them to make no further attempts to collect from my client. Lately I have had a lot of contact with creditors who provide payday loans. For most creditors I can simply allow the court to send them notice of my client’s bankruptcy filing, but payday loan companies use collection methods like automatic debits and requiring postdated checks from the debtor. I can’t delay in providing these creditors notice of the bankruptcy filing because while the notice is in the mail the creditor may collect additional funds from my client. If a creditor doesn’t get notice in time to stop the debit I can get the money back, but there is a delay and this could create cash flow problems for my client, so I call these creditors the moment a case is filed.

Many payday loan companies are particularly aggressive in collection of their loans. One common method that some of these companies use is to tell debtors they will have them arrested for writing bad checks if their postdated check doesn’t cash. Writing a postdated check is not the same thing as writing a check at a store to make a purchase. When you write a check to make a purchase you are telling the retailer that there is money in the account to pay the check. When you provide a postdated check to a payday advance lender you are not making the same representation. If there was money in the bank account you wouldn’t need to borrow from the lender. In fact, after working with thousands of debtors in bankruptcy cases I have never heard of a district attorney prosecuting an unpaid postdated check given to a payday advance loan company as a bad check. If you are planning to file bankruptcy, the best way to stop collection attempts by these lenders is to ask your bank to stop payment on the outstanding checks or simply close the bank account. Once the bankruptcy case is filed the automatic stay goes into effect preventing further attempts to collect.