Payday Loan three days prior to filing

[Nicollette]

I am trying to gain information for my co worker, who is in the process of filing. A payday loan within 3 days of filing - sounds totally fishy to me and like it would raise a red flag. It was for 750 and has been paid down to 500 now, so the intent to repay was there, it just has changed a bit. Is this an issue? It is a no asset chap 7 below median, no other issues.

I think when I filed, my attorney had asked me if I've taken out any payday loans within the last 70 or 90 days, before filing?

[AngelinaCatHub]

Wise man. As a moderator she can probably put you in time out even at home!

Oh she can. Not only that, she's a Master Librarian. Tells me to keep quiet a lot.

Back to the battle at hand, Pay Day loans are about 400% apr. Anyone is foolish for taking one out. Those who are the loan sharks are usually not too nice to people who do not pay back. I would be very careful if anyone wishes to use them. Tires and knee caps can be expensive. 'Hub

[mountanddo]

I think that this person knew very well what they were doing. They knew they were going to file BK but needed money for some reason. They took out the payday loan and then paid some back so it would look like their intentions were to pay it back so it wouldn't get questioned when it was added.

Could they dismiss the entire BK due to this or just that one payday loan?

[nohoneymoney]

It seems the jury is still out on this payday loan. If it was not in the original BK7 filing, to be discharged, and they want to add it now, post 341 meeting, it will get the full attention of the trustee and the payday loan people will get a notice of the action. I suspect the payday loan company will file an objection to the discharge and most likely win. The scheme (if there was that much thought) of making one payment is very transparent. I believe the chances are good that the trustee will smell money and take another look at the whole filing. Depending on the completeness and/or ethics used for the rest of the filing, they could be in for a long BK7 process. There are some protections against a payday loan company at least relative to a bankruptcy judge and the US Trustee. At this point, I would recommend to your friend to take their chances with the Payday loan company.

[bcohen]

If the bankruptcy was a "no asset" Chapter 7, then the debt was discharged, regardless of whether or not it was listed on the petition. Therefore, there is no need to reopen or amend the filing. She should simply quit paying the payday lender, and when the loan defaults and they attempt to collect, then she should send a copy of the bankruptcy discharge, and tell them that the debt was discharged and to cease all further collection action.

[doni49]

Back to the battle at hand, Pay Day loans are about 400% apr. Anyone is foolish for taking one out. Those who are the loan sharks are usually not too nice to people who do not pay back. I would be very careful if anyone wishes to use them. Tires and knee caps can be expensive. 'Hub

There was one occasion that I used one and the numbers DID make sense. I had written a check for my rent and then noticed a bookeeping error on my part. My checking account was going to be about $250 short. My bank would've charged a $35 nsf fee, the LL would've charged a returned check fee AND a late payment fee.

So I paid a $50 fee to borrow $250 until payday, avoided those other fees and avoided the embarrasment of dealing with a returned check. Believe me, it's never happened since then.

[AngelinaCatHub]

There was one occasion that I used one and the numbers DID make sense. I had written a check for my rent and then noticed a bookeeping error on my part. My checking account was going to be about $250 short. My bank would've charged a $35 nsf fee, the LL would've charged a returned check fee AND a late payment fee.

So I paid a $50 fee to borrow $250 until payday, avoided those other fees and avoided the embarrasment of dealing with a returned check. Believe me, it's never happened since then.

I can see your reasoning on this one, but it is rare that a PD loan works out that well.

I told this before but relevant now: Our "friend" who was using a PD loan, was borrowing $500 the end of a month and the next month from her SS she would make a drive 30 miles and pay them back $550. End of month, drive into town, borrow $500 adnausium. I asked her why and she ALWAYS had a reason. I explained with the trip and all she simply was going backwards and shuffling her income into the garbage. Mrs. and I gave her a car and $1000 in cash to make the last PD loan, and have enough money for the excuses at the end of the month. SHE PROMISED not to use them again. After AC told of her blowing the car engine due to a faulty low oil light I told her about (stupid B#@%$), in a days usage, then she within three months was back to PD loans. Some people WILL not learn. 'Hub

P.S. This kind of person in a C7 on discharge would find all the CCs she could and max them out right away.

[mountanddo]

I can see your reasoning on this one, but it is rare that a PD loan works out that well.

I told this before but relevant now: Our "friend" who was using a PD loan, was borrowing $500 the end of a month and the next month from her SS she would make a drive 30 miles and pay them back $550. End of month, drive into town, borrow $500 adnausium. I asked her why and she ALWAYS had a reason. I explained with the trip and all she simply was going backwards and shuffling her income into the garbage. Mrs. and I gave her a car and $1000 in cash to make the last PD loan, and have enough money for the excuses at the end of the month. SHE PROMISED not to use them again. After AC told of her blowing the car engine due to a faulty low oil light I told her about (stupid B#@%$), in a days usage, then she within three months was back to PD loans. Some people WILL not learn. 'Hub

P.S. This kind of person in a C7 on discharge would find all the CCs she could and max them out right away.

It's too bad I didn't know you at the time. I certainly could use a car! Those types of people are never going to be able to be helped because they don't want help.

[jst4f]

If the bankruptcy was a "no asset" Chapter 7, then the debt was discharged, regardless of whether or not it was listed on the petition. Therefore, there is no need to reopen or amend the filing. She should simply quit paying the payday lender, and when the loan defaults and they attempt to collect, then she should send a copy of the bankruptcy discharge, and tell them that the debt was discharged and to cease all further collection action.

While this is true, it only applies if there is no fraud (not sure that is the exact right term). What was the intent at the time they took the payday loan? A few days before filing without a significant unanticipated event, could, in my opinion, be challenged in court by the payday loan company. Is the amount of money involved worth the legal hassle is another question.

[bcohen]

jst4f--While you are right that the payday lender could attempt to challenge the discharge of their debt, the likelihood that this will happen is almost slim to none.

First of all, payday loans carry such high usurous interest that even making a few payments on the loan covers most or all of the principal.

Second, suspecting fraudulent intent, and proving it are two different things. Assuming that the money was used to buy essential non-luxury items, such as food, medicine, or to pay her rent, I'm not sure that obtaining the loan so close to filing for bankruptcy would prove fraudulent intent. After all, even some attorneys have advised that it is ok to use credit cards to buy groceries, medicine, etc, up until the date of filing; the lookback period is for non-essential or "luxury" purchases.

Third, payday lenders in general are not very well-liked by the public, or by the courts. I just don't see a judge agreeing to stick a bankrupt person with this kind of debt unless the alleged "fraud" is so blatantly obvious that there is no possible other explanation.

[AngelinaCat]

It's too bad I didn't know you at the time. I certainly could use a car! Those types of people are never going to be able to be helped because they don't want help.

Not only that, she is a hoarder as well. She is going to get around to going through and selling some of her stuff "one day". But she has very unrealistic ideas about what her stuff is worth. She wants to sell a spinet piano for 6K. No one in their right mind is going to pay her that amount of money which bought the thing new about 40 years ago.

Also, she could never file a Ch7, because there is no way she can list all her stuff.

[DaisysMom]

I was a case manager for the severely mentally disabled for 15 years. It was a good job but I eventually I had to get out before I became a client. No pun intended, it was a high burnout type of work. Anyways, it sounds to me like your "friend" has some mental issues going on. Obsessive/compulsive type stuff. She probably can't help herself from continuing her self destructive behavior. Especially the hoarding behavior is a giveaway. I know you are really disappointed/possibly resentful about the way she went back to her old ways after you helped her, but honestly, she probably couldn't help it. It must be hell to live like that, knowing what you SHOULD do but being powerless to do it.

I'm not trying to make excuses for her behavior but in IMHO, I think there is more going on. And I also want to say....you were wonderful to help her like that and it's sad the way it turned out. Friends like you are hard to find!!

DM

[nohoneymoney]

jst4f--While you are right that the payday lender could attempt to challenge the discharge of their debt, the likelihood that this will happen is almost slim to none.

First of all, payday loans carry such high usurous interest that even making a few payments on the loan covers most or all of the principal.

Second, suspecting fraudulent intent, and proving it are two different things. Assuming that the money was used to buy essential non-luxury items, such as food, medicine, or to pay her rent, I'm not sure that obtaining the loan so close to filing for bankruptcy would prove fraudulent intent. After all, even some attorneys have advised that it is ok to use credit cards to buy groceries, medicine, etc, up until the date of filing; the lookback period is for non-essential or "luxury" purchases.

Third, payday lenders in general are not very well-liked by the public, or by the courts. I just don't see a judge agreeing to stick a bankrupt person with this kind of debt unless the alleged "fraud" is so blatantly obvious that there is no possible other explanation.

That would be interesting case before a judge. Someone gets a payday loan just before filing with no intention to pay it back so they could buy medicine or food. Do you allow the loan to be discharged or not? I know how I would vote but I wonder how it would be judge in the cold light of the law.

[LadyInTheRed]

jst4f--While you are right that the payday lender could attempt to challenge the discharge of their debt, the likelihood that this will happen is almost slim to none.

True. But, if any creditor would challenge it, I would bet it would be a payday lender

First of all, payday loans carry such high usurous interest that even making a few payments on the loan covers most or all of the principal.

This was a $750 loan and only $250 was paid.

Second, suspecting fraudulent intent, and proving it are two different things. Assuming that the money was used to buy essential non-luxury items, such as food, medicine, or to pay her rent, I'm not sure that obtaining the loan so close to filing for bankruptcy would prove fraudulent intent. After all, even some attorneys have advised that it is ok to use credit cards to buy groceries, medicine, etc, up until the date of filing; the lookback period is for non-essential or "luxury" purchases.

In this case, it sounds like the debtor took the loan 3 days before filing and then didn't include it on the petition. I think that is evidence that she thought she had something to hide.

I'm not certain, but I think this is more a cash advance in which case what it was used for is irrelevant. Any cash advance within over $750 within 70 days of filing is presumed to be non dischargeable under BK code section 523(2)(C). The fact that this loan is exactly $750 may avoid the presumption, but you could argue that it is also evidence that the debtor knew exactly what she was doing when she decided on that amount.

Third, payday lenders in general are not very well-liked by the public, or by the courts. I just don't see a judge agreeing to stick a bankrupt person with this kind of debt unless the alleged "fraud" is so blatantly obvious that there is no possible other explanation.

Even if the judge finds that the loan is dischargeable, he wouldn't be too happy about the debtor leaving the debt off her petition and then saying under oath at her 341 that the petition is accurate. That's what I would be worried about if I were the debtor. Yes, the chances of the creditor objecting is low and they would have to prove the debt is non-dischargeable. But, the possible consequences of this debt coming to the court's attention could be severe.

Even if she fully intended to pay the debt, intentionally leaving it off her petition was a bad idea. All debts that exist on the day of filing should be included on your petition, even if you intend to pay them.

[mountanddo]

I am trying to gain information for my co worker, who is in the process of filing. A payday loan within 3 days of filing - sounds totally fishy to me and like it would raise a red flag. It was for 750 and has been paid down to 500 now, so the intent to repay was there, it just has changed a bit. Is this an issue? It is a no asset chap 7 below median, no other issues.

The OP was suspicious of this co-worker to begin with so I highly doubt she took the loan out for medicine or food or she would of said that. She also made it a point to highlight that the friend intended to pay this back. My take is that she took the loan out knowing she was going to file BK and wants to know what the chances are she is going to get away with it.