Can Payday and Title Pawn Loans Be Included In A Bankruptcy?

Everyday consumers are bombarded with television and radio commercials from payday loan and title pawn companies offering a quick fix for those finding themselves in a financial bind. While the money offered to resolve "short term" financial woes is real, the end result more often than not is the recipient ending up with more debt and creditors beating down their door to collect unpaid monies. Amongst the different types of creditors, payday loan and title pawn companies can be some of the most aggressive and creative when it comes to getting their money back and preserving their interest.

Payday and title pawn loans are considered traps because the high interest rates and fees, sometimes as high as 400% percent, all but ensure that the borrower will not be able to pay the loan back when it comes due. With tactics such as requiring the payday loan borrower to tender checks payable each month for the amount due and renewable periods when the debt is not able to be paid off, the borrower often finds themselves watching the total amount due continue to rise each month. Of them, the payday loan is less complicated because it is typically not secured with collateral and will essentially be treated in a chapter 7 or chapter 13 bankruptcy like any other unsecured creditor.

Title pawn loans are unique and present their own complications when attempting to discharge this debt through bankruptcy. With the typical car loan the debtor can include the remaining loan balance for the vehicle in the chapter 13 bankruptcy and avoid a repossession. However, when a loan has been taken out against the title of a vehicle that is owned he or she enters into a separate contract with the title pawn company which provides extra protection for the creditor. O.C.G.A §44-12-131 provides that "unless otherwise agreed, a pawnbroker has upon default the right to take possession of the motor vehicle." All Pawn transactions are for 30 day periods and have an additional 30 day grace period per O.C.G.A. §44-12-131. Therefore, once the borrower is in default of the title pawn agreement they loose their interest in the vehicle after the grace period has expired. Although there are several cases where borrowers have lost their vehicles due to this provision, a good number of our clients have had success keeping their vehicle through a chapter 13 bankruptcy filing.

Douglas County Bankruptcy Attorneys have provided advice to hundreds of clients trying to navigate their way through the aftermath of payday and title pawn loan defaults. We have experience with a wide array of creditors as well as the bankruptcy trustees. At your free initial consultation we will advise you of all your options.