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Payday and Money Tree
Payday loans are short-term, high-interest loans designed to help cover any urgent expenses you don’t have the funds for until your next paycheck. While it might seem like a quick fix, they often lead to deeper financial trouble due to their high fees and interest rates.
A Wenatchee bankruptcy attorney is a good first step when looking for ways out of the never-ending debt cycle of payday and Money Tree loans.
The Role of Money Tree and Other Payday LendersMoney Tree is just one of the more popular payday loan lenders in Wenatchee, Washington, that offer fast cash at high costs. Many find themselves trapped in a cycle of debt, repeatedly rolling over loans and paying more in interest than the original amount borrowed.
The Payday Loan Debt CycleMany residents in Wenatchee and Chelan County struggle with these debts because of the following reasons:
- High Interest Rates: APRs can exceed 300%, which makes repayment difficult.
- Short Repayment Periods: Loans must be repaid within two weeks, resulting in frequent rollovers.
- Multiple Loans: You might have to take out multiple loans to cover existing debt.
- Threats of Collection: Lenders aggressively pursue repayment, sometimes leading to lawsuits against you.
If you’re overwhelmed by payday loans and can’t escape the debt cycle, bankruptcy might be the relief you need. A bankruptcy attorney in Chelan County can evaluate your situation and help you determine the right course of action for your situation.
Chapter 7 Bankruptcy and Payday LoansChapter 7 is a good way to discharge payday loan debt. Some of its key benefits include:
- Elimination of unsecured debts, including payday loans
- Protection from lender harassment and lawsuits
- A quick process, typically completed in a few months
To qualify for Chapter 7 bankruptcy, you must meet the income requirements and pass the means test. A bankruptcy attorney in Wenatchee can help you determine your eligibility.
Chapter 13 Bankruptcy and Payday LoansFor those who don’t qualify for Chapter 7 or wish to retain assets, Chapter 13 bankruptcy is a structured payment plan with these benefits:
- The consolidation of payday loans into a manageable repayment plan
- Protection from creditor lawsuits and wage garnishment
- Repayment over three to five years, often at reduced interest rates
Many payday lenders, including Money Tree, can take legal action against you if you default. If you’re facing a lawsuit due to your unpaid payday loans, filing for bankruptcy can:
- Immediately stop all legal proceedings through an automatic stay (11 U.S.C. § 362)
- Prevent wage garnishment and bank account levies
- Provide a pathway to eliminate or restructure payday loan debt
Washington has laws in place to regulate payday lending and protect consumers. Some of the key regulations are as follows:
- Loan Limits: You can’t take out more than $700 or 30% of their gross monthly income, whichever is lower (RCW 31.45.073).
- Maximum Fees: Payday lenders can charge up to 15% on the first $500 and 10% on the amounts above that.
- Repayment Plans: You are entitled to an installment repayment plan if you can’t repay the loan on time (RCW 31.45.084).
- Restrictions on Rollovers: Lenders can’t allow borrowers to roll over payday loans repeatedly to reduce the debt cycle.
Active duty military members in Wenatchee and Chelan County have additional protections under the Military Lending Act (MLA) (10 U.S.C. § 987) and the Servicemembers Civil Relief Act (SCRA) (50 U.S.C. § 3901 et seq.).
- Interest Rate Caps: Servicemember payday loans can’t exceed 36% APR.
- Protection From Forced Arbitration: Lenders can’t require arbitration agreements that limit legal rights.
- Debt Relief Options: Military members facing payday loan struggles might qualify for legal assistance and bankruptcy protections.
Will You Lose Assets If You File for Bankruptcy in Chelan County?
It depends on the type of bankruptcy you file. Chapter 7 might require liquidation of your non-exempt assets, while Chapter 13 lets you keep your assets while following your repayment plan.
Can Payday Lenders Challenge Your Bankruptcy Filing?
Some payday lenders may attempt to argue that these loans shouldn’t be discharged, especially if they claim fraud. A bankruptcy attorney can help you navigate these kinds of challenges.
How Long Does Bankruptcy Take to Resolve Payday Loan Debt?
Chapter 7 usually takes three to six months, while Chapter 13 can take three to five years. Your bankruptcy attorney can provide a timeline based on your case.
Are Payday Loans Automatically Discharged in Bankruptcy?
Most payday loans are considered unsecured debt and can be discharged in Chapter 7 bankruptcy. However, if your lender can prove that the debt was obtained through fraud, then it may not be eliminated.
What Happens If You Take Out a Payday Loan Before Filing for Bankruptcy?
If you take out a payday loan shortly before you file, the lender may challenge the discharge and claim that the debt was incurred fraudulently. You should always consult your Wenatchee bankruptcy attorney beforehand.
Payday loans from Money Tree and other lenders can easily lead you down a rabbit hole of overwhelming debt. If you’re struggling to claw your way out in Wenatchee, then bankruptcy might be the solution.
Consulting one of our skilled bankruptcy attorneys is a good first step. We can help you understand your options, enabling you to take the necessary steps toward achieving financial freedom.
