problem with Payday Loans in California
Payday loans provide many interesting issues. I've always wondered what's to stop the payday loan creditor from
referring the NSF checks to the district attorney for criminal prosecution? The California Penal Code provides that
bad check writer may avoid prosecution through a diversion program which involves making restitution for the bad
check and paying a collection fee. Criminal actions certainly aren't stayed by the bankruptcy filing. And, if a
defendant is convicted of writing a bad check s/he can be made to pay all kinds of fines, fees and penalties, so the
debtor has every reason to settle early.
Does anyone have a cite to case law deciding that a postdated check isn't a negotiable instrument? Otheriwse,
what's to stop the creditor from simply depositing the check after the bankruptcy is filed? The Bankruptcy Code
provides that the automatic stay does not operate to stay "the presentment of a negotiable instrument and the giving
of notice of and protesting dishonor of such an instrument;" Seems to me that the payday loan creditor would be
within its rights to periodically check the account for funds and present the check when it can be honored.
Yes, you can list it. Some payday loans are treated as secured debt, which
may complicate matters.
I *strongly* recommend filing through a lawyer. I've taken over a number of
cases where a debtor prepared and filed the various bankruptcy documents
without the help of an attorney. Apart from the fact that the schedules
generally have to be completely redone (the exemptions are usually wrong,
debts are not listed, assets are not listed or are listed or valued
incorrectly, the Statement of Financial Affairs is incorrect, and the budget
is generally wrong), a number of these people lost their homes as a result
of not being advised about what was required, how the process worked, how to
value assets, how to deal with various types of debts, etc.--something an
attorney is required to do.
Others ran into severe problems at the Meeting of Creditors, where they have
no one to turn to for preparation or advice, Generally, pro se debtors don't
know what the Trustee is looking for, or how to properly deal with the
Trustee's questions and concerns. One ended up being charged with bankruptcy
fraud--all because she didn't understand the effects of what the information
put in their schedules meant.
Bankruptcy is a very tricky area of the law (even to attorneys who don't
regularly practice it). Interestingly enough for a federal system, it is
very state and locality specific. What will work in California, for example,
probably won't fly here in Maryland.