Are Payday Loans Included in Bankruptcy?

Updated 2026-10-26 · By the Zebra Finance editorial team · How we research

Payday loans are treated like other unsecured debt

If you're weighing bankruptcy, it helps to know payday loans aren't a special category. Bankruptcy sorts debts into groups, and because payday loans don't have collateral such as a house or car, they're usually classified as unsecured, nonpriority debt, alongside credit cards and medical bills. That group is generally dischargeable. The debts bankruptcy normally does not discharge, such as most student loans, recent taxes, child support and alimony, don't include ordinary payday loans.

A post-dated check or ACH authorization doesn't make a payday loan secured. It's a payment method, not collateral.

What happens in Chapter 7

1. You file. You list every creditor, including each payday lender, in your bankruptcy schedules.
2. The automatic stay begins. Under 11 U.S.C. 362, filing automatically stops most collection: lawsuits, wage garnishments and calls demanding payment.
3. Creditors' meeting. A trustee reviews your case. Payday lenders rarely attend.
4. Discharge. If no one objects, the court generally issues the discharge about 60 to 90 days after the date first set for the creditors' meeting.

Chapter 7 has a means test: if your income is above your state's median, a formula decides whether you qualify.

What happens in Chapter 13

In Chapter 13, you repay creditors through a court-approved plan, usually over three to five years. Payday lenders typically receive a share along with other unsecured creditors, depending on your income and assets. Remaining eligible unsecured debt is discharged when you complete the plan. The automatic stay applies here too.

Loans taken right before filing

A lender can ask the court to rule that its debt is nondischargeable because it was obtained by fraud, for example by arguing you borrowed knowing you would file and never intended to repay. The burden is on the creditor, and it has to file on time; otherwise the debt is discharged.

The Bankruptcy Code (11 U.S.C. 523(a)(2)(C)) also presumes certain recent debts are nondischargeable. As of the April 1, 2025 adjustment, that covers cash advances totaling more than $1,250 under an open-end credit plan within 70 days before filing, and consumer debts over $900 to one creditor for luxury goods or services within 90 days. If you're planning to file, don't take on new debt first.

Automatic payments after you file

Filing doesn't automatically switch off a scheduled debit. To keep things clean:

• Send each payday lender your bankruptcy case number.
• Tell the lender and your bank you're revoking the debit authorization; your bank can place a stop-payment order.
• Keep an eye on your account after filing.

Keep a simple record for each payday lender: the lender's name, your loan or account number, the date you sent your case number, and the date you revoked the debit authorization. If a debit still goes through after you file, that record makes it quicker to raise with the lender, your bank and your trustee.

Title loans are different

A title loan is secured by your car. A bankruptcy discharge ends your personal obligation, but it doesn't remove a lien on property, so the lender keeps its rights to the collateral. Many people keep the car by continuing to pay, reaffirming the debt, or including the loan in a Chapter 13 plan. See title loan repossession.

Common questions before filing

Do I have to list a payday loan I want to keep paying? Yes. You must list all creditors. You can still voluntarily repay a discharged debt later.

What if the debt was sold to a collector? List the collector and, if you know it, the original lender. The discharge covers the debt, whoever holds it.

Does bankruptcy apply to online or tribal lenders? Bankruptcy is federal law, and the automatic stay and discharge apply to creditors generally. See tribal loans.

Do bankruptcy rules change by state? The Bankruptcy Code is federal, but the property you can protect depends on exemptions that differ by state, and some states let you choose between state and federal exemptions. Lending rules also differ by state; see payday loan rules by state and personal loan rates by state.

Borrowing again after bankruptcy

A discharge doesn't bar you from new credit. Many lenders in our network consider all credit types and focus mainly on your current income and bank account, so a recent bankruptcy doesn't automatically mean a no. Here's what lenders usually look at:

• Your case status: whether you've received a discharge, or, in Chapter 13, whether you're still in your plan.
• Steady income deposited into a checking account in your name.
• Recent account history: regular deposits and an account in good standing since filing.
• Your request: an amount that fits your income comfortably.

Step by step

1. Keep your discharge order handy in case a lender asks for it.
2. Check your credit reports to make sure discharged debts show a zero balance.
3. If you're in Chapter 13, check your plan's rules first; new debt during a plan usually needs approval from the trustee or the court.
4. Request a modest amount. A smaller loan is easier to approve and to repay on time.
5. Set up automatic payments and ask whether the lender reports to the credit bureaus, so on-time payments can help rebuild your history.

Worked example

A $1,000 installment loan over 12 months at a sample 36% APR is about $100.46 a month, about $1,205.55 in total. At 24% it would be about $94.56 a month. These are illustrations; your lender shows the exact rate and payment before you sign. Try the personal loan calculator.

Ready when you are: see if you qualify in about 3 minutes.

Bankruptcy isn't the only path

Bankruptcy is a big step with court fees, usually attorney fees, and lasting credit effects. It tends to fit when payday loans are part of a larger pile of unsecured debt. If you have just one or two payday loans, many people resolve them with an extended payment plan from the lender, or by using a personal installment loan to pay them off and spread repayment over several months. See how to consolidate payday loans.

And after a discharge, when you're ready to borrow again, a personal installment loan that reports on-time payments can help rebuild your credit history. Lenders in our network consider all credit types, and the form takes about 3 minutes. See if you qualify.

Frequently asked questions

Sources

• 11 U.S.C. 362 — Automatic stay
• 11 U.S.C. 523 — Exceptions to discharge

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