Payday loans seem to be a rescue and an appealing option when you struggle with your bills and debts. They can help in managing monthly payments. They are also known as Cash Advance Companies or Check Cashing Stores, offer short-term loans with higher interest rates. Primarily, these payday loan cash advance companies help borrowers meet their monthly payments until the arrival of their next paycheck. Moreover, they serve as an emergency exit for some people, especially those with a tight financial situation.
A payday loan is a light in the tunnel for people spiraling toward bankruptcy. I have been dealing in this industry for more than 30 years now and have extensive knowledge of bankruptcy code and comprehend the handling of bankruptcy case types, including bankruptcy chapter 7 and bankruptcy chapter 13. Payday loans are a legal option in Kentucky for a quick cash advance; however, they are not the only option. Payday lenders often do not consider the borrower’s ability to repay the loan. Browse this article until the end to learn more about how to avoid a payday loan, the Kentucky payday loan laws, and other options.
Overview of Payday Lending in Kentucky
Payday lending is a type of short-term, high-interest loan designed to help individuals cover unexpected expenses or financial emergencies. In Kentucky, payday lending is regulated by the state’s Deferred Deposit Service Business and Check Cashing law. This law ensures that payday lenders operate within a framework that protects consumers from predatory lending practices.
Payday lenders in Kentucky are required to obtain a license from the Kentucky Department of Financial Institutions. This licensing process ensures that lenders comply with state regulations, including limits on loan amounts, interest rates, and fees. By adhering to these regulations, payday lenders can provide a necessary service while safeguarding the financial well-being of their customers.
Payday Loan Laws – What are They?
Per the Consumer Financial Protection Bureau guidelines, payday loans or paycheck advances are short-term loans with elevated interest rates from the payday loan providers, typically for 500 dollars until your next paycheck arrival.
Though there is no defined definition exists, some of the standard features described by several payday loan companies are listed as follows:
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Payday loans are offered for small amounts, usually, around 500 dollars, give or take. In Kentucky, the maximum limit for payday loan providers is 500 dollars.
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The payday loan fees, which are considered finance charges, range from 10 to 30 dollars for every 100 dollars borrowed, along with a 1-dollar database fee.
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The borrowers typically owe the amount back the day their next paycheck arrives. The due dates might range from 2 to 4 weeks after you take the payday loan. The maximum loan term in Kentucky is 60 days.
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Payday lenders working with Chapter 13 bankruptcy plans typically do not consider the borrowers’ ability to repay their loans.
Qualification Criteria
Obtaining a payday loan is relatively easy; however, you must obey the following criteria:
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Submit valid identification such as state ID or driving license
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Submit a complete statement of your monthly income and future income
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The borrower’s bank account must be a checking account
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To apply for a payday loan, you must be 18 years or older
Payday Loan Terms and Limits
Payday loans in Kentucky come with specific terms and limits designed to protect consumers from excessive debt and financial strain. Understanding these terms and limits is crucial for anyone considering a payday loan.
Maximum Loan Amount
In Kentucky, the maximum loan amount for a payday loan is $500. This means that payday lenders in the state are not permitted to lend more than $500 to an individual at any given time. This limit helps prevent borrowers from taking on more debt than they can reasonably repay.
Rates, Fees, and Other Charges
Payday lenders in Kentucky are allowed to charge a maximum fee of $15 per $100 borrowed. This fee is considered a finance charge and is not classified as interest. In addition to this fee, payday lenders may also impose other charges, such as late fees and non-sufficient funds (NSF) fees. These additional fees can add up quickly, so it’s important for borrowers to understand all potential costs before taking out a payday loan.
Maximum Term for a Payday Loan
The maximum term for a payday loan in Kentucky is 60 days. This means that payday lenders in the state cannot offer loans with terms exceeding 60 days. Additionally, payday lenders are required to provide borrowers with a minimum of 14 days to repay their loans. This regulation ensures that borrowers have a reasonable amount of time to repay their loans without falling into a cycle of debt.
By understanding these terms and limits, consumers can make more informed decisions about payday loans and avoid potential financial pitfalls.
Are Payday Loans Included in Bankruptcy?
In chapter 13, the payday loans are partially discharged; if you file for bankruptcy in chapter 7, your payday loan will be discharged entirely.
In chapter 13 bankruptcy, the bankruptcy court will ask you to repay your debt through a defined and set repayment plan. Likely, payday loans are the same as other unsecured installment loans and probably include your repayment plan so that you can pay them back along with other creditors.
Subsequently, you might be able to discharge some of the payday loans in chapter 13 bankruptcy, provided with the evidence that paying these payday loans back will put on a lot of pressure on your finances under a hardship provision.
Let us consider an example, suppose a person can not pay their monthly payments in an extended repayment period due to unemployment or economic distress; such loans will simply be discharged.
Can They Be Cleared with Bankruptcy?
Most of the time, bankruptcy allows people to clear out some or all of their payday loans. In chapter 7 bankruptcy, most people end up discharging their debts. Not only the medical bills and credit card bills but also their payday loan.
However, if you file for chapter 13, your payday loans will be partially discharged, and the rest will be included in the repayment plan.
Kentucky Payday Loan Laws and Options
The biggest drawback of payday loans is their enormously high annual percentage or APR rate. The Kentucky payday loans lenders sometimes charge up to 460% APR. Simply put, a pair of shoes worth 30 dollars with an APR percentage of 460% will cost you up to 138 dollars.
Secondly, according to Kentucky, payday loan laws are short-term. Like in Kentucky, you must pay back the payday loan within 60 days, which sometimes creates difficulty.
Recent legislative changes have distinguished between check cashers and deferred deposit businesses. These changes impact the licensing and monitoring of deferred deposit businesses in Kentucky, ensuring stricter regulatory oversight.
However, a Kentucky payday loan qualification usually doesn’t require a minimum credit score limit. Moreover, in some stances, you only have to bring your checkbook.
The regulatory framework surrounding deferred deposit transactions in Kentucky emphasizes the legal definitions and licensing requirements for these transactions, which differ from traditional loan services.
Kentucky law sets a maximum annual interest rate on financial products at 36 percent, yet payday lenders are exempt from this limit, leading to exploitative lending practices that affect a significant number of low-income borrowers in Kentucky.
Furthermore, in Kentucky, you can borrow twice from a single payday loan lender, up to 500 dollars for a single borrower. The Kentucky legislature has played a significant role in regulating payday lending, with recent laws aiming to protect borrowers and ensure regulatory oversight.
Licensed lenders in Kentucky must adhere to specific regulations regarding loan amounts and fees, including maximum loan limits and fees charged per $100 borrowed.
The Department of Financial Institutions is regulating payday lenders. This Kentucky Department of financial institutions has issued fines to several payday lenders to maintain strict surveillance. The introduction of S.B. 145 prohibits the issuance of new payday loan licenses, affecting the future of payday lending in the state.
Legislation affecting payday loan licenses, such as S.B. 145, not only prohibits new licenses but also separates licensing for different financial services, indicating a decline in payday lending operations in the state.
What About Fraudulent Acts?
There has been an ongoing fight against payday loans. Currently, 34 out of 50 states allow payday lenders to work safely and freely. And technically, Kentucky is one of those states that have not authorized free regulation.
But many people still offer services unless their license expires. This change can not be immediate as it is more like a gradual transition. Therefore, the borrower must be aware before taking any loans.
Many payday lenders, such as Cash Express, have been involved in repeated legal violations and underhanded practices. This highlights the need for stronger regulatory measures to protect consumers from exploitative lending practices.
Most importantly, there are some critical issues that you should keep in consideration after borrowing from a company. Firstly, knowing that you might file for bankruptcy sooner, taking a payday loan is fraudulent. It is because you tried to cheat the system by not paying the money back by making bankruptcy an excuse.
Bankruptcy doesn’t discharge debts that are fraudulent debts. If creditors are spotted at some point of bankruptcy as a fraudulent act, they can object to your discharge orders and ultimately can file for adversary proceedings.
Companies typically ask for a post-dated paycheck in exchange for the cash advance they provide. But this brings two problems: first, the lenders cash the check after you file the bankruptcy petition, violating the automatic stay protection. The Consumer Finance Protection Bureau has a consumer complaint database you can search on.
Secondly, the lending company might begin to accuse you of writing a lousy post-date paycheck and threaten you with criminal charges.
Can I Apply While Working in Chapter 13 Bankruptcy?
You are pledged to make payments on your credit for the next 3-5 years while in Chapter 13 bankruptcy proceedings. During that period, you are bound to receive bankruptcy court approval before applying for a new loan amount.
In simple words: it is tough to get new loans while in Chapter 13 bankruptcy, especially when encountering financial hardship. Already you have to make monthly debt repayments, so adding more loans from providers will add more baggage to you.
Moreover, there are some cases where people get back so much on their repayments that the bankruptcy court has to dismiss their case. If such a thing happens, there is a possibility you could file bankruptcy chapter 13 and list the loan providers along with the creditors to pay back.
Contact Bankruptcy Attorneys Today!
I am passionate about providing my clients with ease in their finances and promoting them for a fresh start from unsecured debts and secured debts. Whenever I meet my client, I prioritize building a solid and healthy attorney-client relationship while safeguarding all sensitive or confidential information.
To discuss how payday loans work and how to repay the payday lender while working on a chapter 13 bankruptcy plan, and to get all the debt relief information, book a free consultation session now!
Resources for Bankruptcy
Louisville, Kentucky Bankruptcy Forms
How to Win Great Chapter 13 Plan Payments • Video
Filing Chapter 7 & Chapter 13 Bankruptcy
Means Test Qualifying for a Kentucky Chapter 7
How to Get an Affordable Chapter 13 Budget • Video
If you need to file bankruptcy, don’t delay because timing is crucial. I am here to help you. So, contact my office immediately to start the conversation with Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905.
