{"id":9052,"date":"2019-01-28T07:00:15","date_gmt":"2019-01-28T07:00:15","guid":{"rendered":"https:\/\/nybankruptcy.net\/main\/?p=9052"},"modified":"2019-05-17T01:43:32","modified_gmt":"2019-05-17T01:43:32","slug":"is-a-payday-loan-a-cash-advance-in-bankruptcy","status":"publish","type":"post","link":"https:\/\/nybankruptcy.net\/main\/is-a-payday-loan-a-cash-advance-in-bankruptcy\/","title":{"rendered":"Is a Payday Loan a ‘Cash Advance’ in Bankruptcy?"},"content":{"rendered":"

Many New York bankruptcy debtors take out payday loans to cover costs before receiving their actual paychecks. I’ve written about these types of loans frequently, particularly the Consumer Financial Protection Bureau’s attempts to limit them from becoming “debt traps<\/a>.” Aside from driving debtors into bankruptcy, another place where payday loans can intersect with bankruptcy is when debtors take out cash advances within 70 days of their petitions, which the Bankruptcy Code presumes are fraudulent transfers if they’re greater than $950. Can lenders or the trustee argue that payday loans are cash advances?<\/p>\n

The short answer is yes because they can argue whatever they want, but that doesn’t mean it’ll persuade a bankruptcy court.<\/p>\n

But the longer answer is that debtors have a good argument on their side: what the Bankruptcy Code actually says about cash advances in section 523(a)(2)(C)(II)<\/a>. Unusually, the Bankruptcy Code doesn’t define “cash advances” in its definitions section and leaves it to this section. Specifically, the statute states that a “cash advance” is “an extension of consumer credit under an open-end credit plan.”<\/p>\n

Okay, so what’s an “open-end credit plan”?<\/p>\n

A credit plan is open ended if it’s not for a specific amount of money, for example a credit card with a $10,000 limit. A consumer can take a cash advance for amounts under that line. Once the consumer’s credit card amount is repaid, the full amount of credit is available again. A payday loan, by contrast is for a specified amount, i.e. the debtor’s paycheck. Once the payday loan is repaid, it’s done or “closed.”<\/p>\n

This should be a compelling argument for debtors facing payday lenders claiming that debts to them are cash advances. However, they can still simply try to argue that the payday loan was still a fraudulent transfer by the debtor with the intent of not repaying the loan.<\/p>\n

The problem with this position is that it’s hard for the lender to prove that the debtor didn’t intend to repay the loan, particularly when these types of loans are often used by debtors out of desperation. Obviously a debtor who uses a payday loan to make luxury purchases is going to run afoul of section 523 for different reasons, but that’s going to be unusual.<\/p>\n

At the same time, debtors who take out recurring payday loans will be able to argue that their payday loans existed from the first time they took them out, so the 70-day presumption might not be triggered.<\/p>\n

Debtors’ alternatives to running the payday lenders’ gauntlet is to either file in chapter 13 or wait until the 70-day period has expired to file in chapter 7.<\/p>\n

If you are facing financial challenges, whether you’ve taken out a payday loan or not, then talking to an experienced New York bankruptcy lawyer can help you strategize your best course of action.<\/p>\n

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY<\/a> Bruce Weiner for a free initial consultation.<\/p>\n","protected":false},"excerpt":{"rendered":"

Many New York bankruptcy debtors take out payday loans to cover costs before receiving their actual paychecks. I’ve written about these types of loans frequently, particularly the Consumer Financial Protection Bureau’s attempts to limit them from becoming “debt traps.” Aside from driving debtors into bankruptcy, another place where payday loans can intersect with bankruptcy is …<\/p>\n

Is a Payday Loan a ‘Cash Advance’ in Bankruptcy?<\/span> Read More \u00bb<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[16,7],"tags":[2,21],"acf":[],"yoast_head":"\nIs a Payday Loan a 'Cash Advance' in Bankruptcy? - Bankruptcy Attorney<\/title>\n<meta name=\"description\" content=\"Many New York bankruptcy debtors take out payday loans to cover costs before receiving their actual paychecks. 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