Payday loan wants money after bankruptcy discharge. What are my rights?

Recently on our bankruptcy forum a user asked, “I filed bankruptcy in 2015 and received a discharge shortly thereafter. Recently a pay day loan company has come to me and told me that I owe them money. I thought this loan was discharged in my bankruptcy. Can they come back to me after my bankruptcy discharge and try to collect the payday loan debt?

Options after bankruptcy filing and discharge of a payday loan debt

If you have filed for bankruptcy and a debt has been discharged it is a legal violation for a creditor to contact you again in an attempt to collect the debt. It’s important to remember, however, that creditors can make mistakes. Before taking legal action there are a number of steps you can take, many of which may easily resolve the issue.

First, talk to the creditor. Notify them that you have filed for bankruptcy and that the debt they are attempting to collect has been discharged. If you have a bankruptcy lawyer, you can give them your attorney’s name and number. This information can also be written on the bill and mailed back to the payday loan company with notification that they need to cease all collection efforts.

If the creditor does stop all contact, then you know it was not a mistake and they either legitimately think that you still owe them money or they don’t care.

If this occurs, the second step is to gather all of the information about the loan and send it directly to your bankruptcy attorney. In most cases the bankruptcy lawyer will contact the creditor and notify them that any further contact will result in a lawsuit.

Creditor won’t stop contacting me about my payday loan even after a legal threat

Unfortunately, some creditors are persistent and even the threat of legal action will not deter them from unlawfully contacting you. If your attorney does decide to sue them do not expect a windfall payment.

In fact, even if the creditor is fined, the amount they will be required to pay is likely to only cover your attorney’s fees. The benefit, however, is that the creditor will be forced by the court to stop contacting you.

Was the payday loan actually discharged?

Another issue to investigate is whether the payday loan was really discharged during your Chapter 7 bankruptcy. Although most payday loans are discharged in a Chapter 7 bankruptcy, payday loan lenders may have the legal right to challenge a payday loan discharge if you received the payday loan or cash advances (up to $875) within 70 to 90 days of the bankruptcy filing.

Under these conditions, the payday lender may have the legal argument that you received the payday cash advance or loan without any intention of repaying it. This action could be construed as fraud under US bankruptcy laws and regulations. If the bankruptcy court agrees, your payday loan discharge could be denied.

Now, you did not specify whether or not this was the case for the payday loan now in question, but if it was, then the payday loan may not have been discharged and this creditor now has the legal right to continue their debt collection efforts.

If this was the case, however, it’s likely that you would have already been aware of this issue. In fact, the payday loan company would have had to challenge the discharge in court and proven their case during the bankruptcy proceedings, something a good lawyer would have discussed with you.

Bottom Line:

Although many different types of unsecured loans are discharged by filing Chapter 7 bankruptcy or restructured through a Chapter 13 debt repayment plan, there are specific types of unsecured debts which are not discharged.

Certain creditors may also have the legal right to challenge a debt discharge. If they win their challenge, they can continue their debt collection efforts after the bankruptcy is completed.