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What happens to my payday loan if I go Bankrupt
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What happens to my payday loan if I go Bankrupt

What happens to my payday loan if I go Bankrupt

A payday loan is written off if you go bankrupt. However taking new loans should be avoided.

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Can a Payday Loan be included in Bankruptcy?

A payday loan is an unsecured debt. As such this type of debt is always included and written off if you go bankrupt.

You may be concerned if you took the loan quite recently. Will you be accused of fraud? Don’t worry. You will not.

The loan company will never formally make this accusation against you. If they were to try, the court would blame them for making a bad lending decision and not making better checks about whether you could repay the loan.

Payday loans are written off if you go Bankrupt. You do not need to be worried about being accused of fraud.

Can you get a new loan while you are Bankrupt?

It is not illegal to apply for a new payday loan while you are bankrupt. The rules state you are not allowed to borrow more than £500 without telling the person lending the money about your Bankruptcy.

Borrowing less than £500 from this type of lender is common. As such it is likely you will get the loan because you do not have to mention you are bankrupt and the lender is unlikely to carry out a credit check against you.

However you should avoid borrowing more while you are bankrupt if possible. The issue is that it will be almost impossible for you to repay the new debt. It cannot be included in your bankruptcy as it has been taken after the start date.

It may be possible to get a new loan while you are bankrupt. However you should avoid doing so.

What if you have already taken a payday loan during Bankruptcy?

Any new debt you incur after the date of your bankruptcy cannot be included in the agreement. You will be personally liable to repay it. As such you will have to repay any new payday loan you take out.

If you are currently paying an IPA your Official Receiver might allow you to take a payment holiday. However if they do not you will have to repay the loan by making savings from your agreed living expenses budget.

If you have no disposable income you will have no choice than to repay the loan by making savings elsewhere.

Want more advice about payday loans and bankruptcy? Give us a call (0800 044 3194) or complete the form below.

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Comments 2

  1. Jenny

    Hi could I get a payday loan after bankruptcy

    1. 15.05.2018

      Hi Jenny

      Once you are discharged from bankruptcy (normally after 12 months) there is no legal reason why you cannot borrow again. However the record of your bankruptcy will remain on your credit file for 6 years from the start date. As such your credit rating will remain poor for this time. Until it is removed after 6 years you will still find borrowing difficult.

      In the mean time there are some lenders who may lend to you. These often include payday lenders. However if you want to try and improve your credit rating you should avoid these. A history of borrowing from payday lenders on your credit file is likely to keep your credit rating poor rather than make it better.

      A more sensible idea to improve your credit rating before the record comes off your file would be to get a credit repair credit card. However you must ensure you pay off the balance in full each month to avoid high interest rate charges.

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James Falla
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert
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