Illegal Payday Loans in Chap 13

[murph996]

Im sure Im not the only one that fell into the payday loan trap--that resulted in bankruptcy.

I had a variety of storefront payday loans and online payday loans. Most of the online loans are illegal lenders for Ohio.

In February I closed my bank account, and opened another. I sent letters to these lenders that I had overpaid them in most cases. And after initial collections efforts, I have not heard a word from them.

I am preparing my Chapter 13 case--and it will be a 100% repayment plan. My lawyer is insisting that I include all of these illegal lenders. He doesnt think that many of them will respond, so the debt will likely be whiped out.

My hesitation in including them is that hey have no legal recourse to get payment. Sure I may end up hearing from them some more, and would like to avoid that. But, if I include them in my list of lenders, and they respond--I may end up having to pay them--when otherwise I never would have had to pay them.

Has anyone here included unlicensed lenders--and did they respond to the petition--did you have to repay them anything? If the likelihood is next to zero that they will respond and that I will have to repay them--I can understand why it would benefit me to include them..

[justbroke]

You MUST include them. There is a so-called "disputed" debt. What you do, is list it on Schedule F -- Unsecured Debts -- and mark them as "contingent", "unliquidated", and/or "disputed". Should they file a claim in your 100% Chapter 13, then you would file an objection to the claim. At that point, you would then "litigate" whether or not they are in fact a creditor per the Bankruptcy code.

How you litigate their legitimacy, as a creditor, would be based on whether the loans were actually legal under State or Federal non-bankruptcy law.

I would not play around with this. Let's say that you don't list them. They somehow avoid bothering you during your Chapter 13, but then come at your with a vengeance after your discharge. It is found that they do have legal standing in State non-bankruptcy court, and now you owe them thousands upon thousands in fees, accumulated interest, attorney fees, and anything else they could legally tack on.

You should follow your attorney's advice on this matter.

[pamkev]

I agree with justbroke you just never know what will happen if you don't add them.

[bcohen]

You should include EVERY debt, as others have already said. Only creditors who file a timely claim will receive payment in your Chapter 13, and it is very likely that these unlicensed lenders won't bother to respond, which means that the debts will be discharged. If any of them do file a claim, you (your attorney) can object to that claim.

[murph996]

Thanks. Glad I found this forum. Anyone out there have a history with those lenders in bankruptcy? Also what about licensed lenders? My lawyer said it was likely that not all of those would respond either..since they may assume that they would get very little $ being an unsecured lender.

[lillymarlene]

Hi murph, welcome. Most or maybe all of my lenders were licensed, but for what it's worth, only about 1/2 of them bothered to make a claim on my chapter 13. Then I was also in dispute with one, an alarm security company for my business, that claimed I owed a lot more than I did.

[murph996]

Thanks. That gives me hope. Although when putting together my creditor list..the payday portion isnt as big as I thought. The bi-weekly payments were literally killing me..From running around on payday paying and reborrowing from the storefronts, and the automatic deductions from the online lenders. Not having to deal with all that is already a big relief. Getting all my stuff together to file is daunting..but much better than what Ive been going through. (Its not easy finding addresses for some of these).

I was going to do an emergency BK but need to get my 2nd mortgage current first so that I wont have to pay it through the plan. So I'll likely be filing in 3 weeks. Im actually really looking forward to that point. I'll probably dread the court date when it gets closer..

[lillymarlene]

To find addresses, you might want to start with copies of your credit report from the 3 big "credit bureaus."

[justbroke]

I would say this. I would alot worry about whether or not they file a claim. It is well known that some creditors just don't bother filing claims in Chapter 13s, because it's not worth their time/effort. However, many creditors sell their claims to companies like B-Real, B-Line, eCast Settlement, LVNV Funding, etc, in Chapter 13s.

The way Chapter 13s work is that just about anyone can file a claim. Whether or not they are a "creditor" as per the bankruptcy code, is something that you would deal with by objecting to the claim and litigating that should it come to a fight.

For some reason, I am getting the feeling that you aren't real sure if they do have legal standing in a bankruptcy context. I'd stop worrying about them filing a claim. I'd concentrate on policing any claims filed and taking the necessary steps if the creditor's claim should be disallowed.

Are you planning to file pro se?

[murph996]

No, I have a lawyer. I was unsure of the dispute process, so yes I was worried about whether those cresitors would even file a claim. He's been very helpful--I just met with him last Tuesday for the first time..so I havent asked him everything at this point..beyond asking if I had to include the illegal lenders.

I DO know that outside of bankruptcy those cresitors have no legal claim..that was the reason for my hesitation..I didnt want to give them a shot at money they never would have gotten.

None of them have shown on the cresit report--but I have been able to dig up addresses for all but one--whose website is gone, and may be out of business.

[justbroke]

I would only repeat, that regardless of the status of the creditor, you should always list them. Even if you may have knowledge that they are not creditors under any law, that hasn't been adjudicated in your case. The fact is that you borrowed money from them and they may have a legitimate claim. Even if the statute of limitations has passed or the creditor's paperwork isn't right, don't assume that a Trustee won't pay them if they file a claim.

Just work with your attorney and ask him/her when you can see the claims because you want to make sure that particular "creditors" don't attempt to file a claim.