Payday Loan and Bankruptcy
A payday loan will be written off if you go bankrupt. However taking new loans while bankrupt should be avoided.
Jump to article content:
- Can a payday loan be included in Bankruptcy?
- Can you get a payday loan while bankrupt?
- What if you have taken a new loan while bankrupt?
- Alternatives to borrowing more during bankruptcy
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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 if you go bankrupt.
You may be concerned about this if you took the loan quite recently. You may have heard that you could be accused of fraud. It may be that you have spoken to someone at the lender and they even suggested this to you.
However you can rest easy. 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.
If you have payday loans they will be written off if you go Bankrupt. You do not need to be worried about being accused of fraud.
Can you get a new Payday Loan while you are Bankrupt?
It is not illegal to apply for a 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 payday 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.
A new loan taken while you are bankrupt cannot be added. You are responsible for paying it.
Alternatives to borrowing more during Bankruptcy
You may be struggling financially during your bankruptcy because you have been asked to make a payment towards your debts which you cannot afford. If this is the case it is possible that your living expenses budget has been incorrectly calculated.
You should contact your Official Receiver straight away and explain you believe feel that your living expenses are too low. If they agree they will ask you to complete a new income and living expenses budget so your situation can be reviewed.
If your living expenses are correct another way to avoid getting into financial difficulty during Bankruptcy is to try and save each month. Once your expenses budget has been agreed it is yours to spend or save as you wish. You should have provisions for expenses which do not crop up each month such as car maintenance or emergencies. You should save this cash so it can be used to overcome financial issues that crop up.
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