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Payday Loans and Bankruptcy


Payday loans are increasingly being used by Colorado consumers to finance emergency expenses. In general you should avoid these loans because they have extremely high interest rates, but people without options often turn to these loans owing to their convenience and lack of better options.

Payday loans are made by companies who then take a series of post dated checks which they cash unless you come in and repay the loan and interest at certain times in the future. There are many misconceptions about these loans because consumers assume or are told that not repaying the money is the same as bouncing a check. When you file bankruptcy, you of course get protection from the automatic stay and the payday loan company is prevented from collecting any further funds from you.

This, filing bankruptcy on a payday loan, is not fraud and is not criminal and does not subject you to the triple damages provision of Colorado law where you can owe three times the face value of a check plus attorneys fees for bouncing a check. This is because everyone involved knows that there is no money in the bank to cover the check when it is written. As long as you are not intentionally getting a payday loan knowing you will file bankruptcy, these loans are treated the same as credit cards or other unsecured debt in your bankruptcy case. You can file bankruptcy and eliminate these loans and you will not be in criminal trouble for doing so.