Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Dec 8, 2011

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Payday loans can be forgiven if a borrower files for chapter 7 bankruptcy. But not everybody qualifies for chapter 7 bankruptcy, as it has more stringent guidelines than other forms of bankruptcy. A bankruptcy lawyer can advise you on an individual basis as to whether or not your financial situation would allow for chapter 7 bankruptcy.


If you do qualify and find yourself swamped in a never-ending cycle of payday loan debt, chapter 7 is the one that has the greatest chance of wiping payday loan debt away. Chapter 7 bankruptcy is the chapter designed to give debtors a “fresh start.”


However, such a service comes with an enormous cost to the individual. Unlike other forms of bankruptcy, the debtor will not file a plan of repayment, as he will no longer be responsible for unsecured debt. Rather, the debtor’s nonexempt assets are handed over to a trustee, and those assets are sold or auctioned. All of the money acquired by the liquidation of assets is then used to pay back outstanding loans.


Some non-exempt assets include:

  • Family heirlooms
  • Collections
  • Instruments
  • Cash
  • Stocks
  • Bonds
  • Second cars
  • Second properties


These non-exempt items will be sold to pay off your payday loans. Regardless of whether or not enough money is made to pay off your payday loans, you will no longer be responsible for any outstanding debt.


Other assets, such as your primary place of residence, a single vehicle, certain jewelry, appliances, and a reasonable amount of clothing will be exempt, and not touched by a bankruptcy trustee.


Meet with a bankruptcy lawyer and make sure your payday loan debt is critical enough to warrant such a drastic step.