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Yes, you can file for bankruptcy on your payday loans, but it should not be your first step if you cannot pay your debts. Bankruptcy will damage your credit score and mean you may not be able to borrow money again. 

Filing for bankruptcy

Bankruptcy should always be one of your last options when you cannot repay your loans. Declaring bankruptcy may write off your outstanding payday loans but it will also damage your chances of being able to take out a loan ever again. 

It is alway worth speaking to a financial advisor if you are having trouble repaying your loans. There are even charities that offer financial advice for free to those struggling. A financial advisor will be able to explain all your options to you and advise you on the best route out of debt. If a financial advisor believes bankruptcy is your best option, they will be able to support you in the process of filing for bankruptcy. If you are already certain about your choice to file for bankruptcy you may wish to hire a bankruptcy attorney straight away.

Is there an alternative to bankruptcy?

Yes. An option to avoid bankruptcy is an IVA – an individual voluntary agreement. This is an agreement between you and your lender that interest will be frozen to help cut down the overall amount you need to pay. This will still negatively affect your credit score but it has less stigma attached than bankruptcy. An IVA can be dealt with privately, as opposed to bankruptcy which is announced publicly. 

What should I do if I cannot repay my debt?

If you are unable to pay off your loan the very first thing you should do is get in contact with your lender. 9 times out of 10 your lender will be able to work out a better payment program that means you can repay your loan on a schedule that works for you with less financial pressure. Lenders will always try their best to ensure that you can repay your loan, so if you begin to struggle to repay, contact your lender first.

If you are unable to repay your loans, there is the possibility of claiming bankruptcy. Claiming bankruptcy is something that should be talked over with a professional and will only be appropriate in certain situations.

Being unable to repay a loan can be an incredibly stressful situation. In situations like this, it is adviable to seek advice from a nonprofit credit counsellor, bankruptcy attorney or legal aid centre about your next moves. 

What will happen if I just don’t pay?

Defaulting on your payday loan can drain your bank account, trigger wage garnishment, collection calls and even lawsuits. Wherever possible, keep up with your repayments to avoid these outcomes. 

Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan. The lender will set up automatic withdrawals from your account, attempting to regain as much for their loan as possible. This can result in bank fees for you. If this is unsuccessful your lender may begin collection calls, which will involve calling you and in some cases visiting you in person to attempt to collect the debt.

If this is unsuccessful, your lender may set up wage garnishment, which involves a part of your paycheck being withheld, and going directly to the lender to repay your loan.

During the time in which your loan is not being paid, it will still be accrediting interest. It is always important to take a proactive approch to tackling your debt, the longer you engnore it, the bigger it will get.

Can my lender take me court?

If a client is unwilling to cooperate with the lender, it is possible for a payday lender to take you to court over your unpaid loan. This will always be a last resort and in the vast majority of cases the court does not need to be involved.

Court cases are not always about large sums of money. It is common for a lender to take a client to court over a relatively small unpaid loan. You should not be surprised if you receive a lawsuit following an unpaid payday loan.