We took out some payday loans after filing a chapter 13. What should we do?

Short Answer:  Let your case dismiss and file a new chapter 13 with those new payday lenders as new creditors.

post bk payday

When you file a chapter 13 case, you propose to make some kind of payment to your creditors over the next 3-5 years.  You are NOT allowed to take out any loans (such as car loans, mortgages, or payday loans) without court approval.

However, it happens.

Recently, I was contacted by clients who had filed a chapter 13 last year and were consistently making their payments to the bankruptcy trustee.  Unfortunately, hours were slow over December and January, and they took out about $3,500 in new payday loans.  Even worse, they were using this money to keep up their chapter 13 payments.  Now, they are having a hard time keeping up their chapter 13 trustee payments and making those payday loan weekly payments at 500%+ interest. Yes, over 500% interest.

They had never spoken to me about the payday loans until after the damage was done.  If they had called me back in December, I would’ve told them that missing 1 or 2 chapter 13 payments was not going to be the end of the world.  Now, we are letting the case be dismissed.  Yes, dismissed on purpose.

When we file the new case, we will list those new payday lenders in the bankruptcy and wipe them out.  Yes, there is a chance that they will object and demand that we pay them back in full, but I’ve never had it happen in a chapter 13.