Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
If you’ve ever taken out a payday loan, you probably know how quickly it can spiral out of control. What starts as a small loan to cover an unexpected expense often turns into a cycle of debt, with high interest rates that make repayment nearly impossible. Many borrowers in Wisconsin find themselves trapped—rolling over loans, taking out new ones to pay off the old ones, and dealing with relentless collection calls.
Are you in this situation? You’re not alone. The good news is that bankruptcy may offer a way out. Filing for bankruptcy can eliminate payday loan debt, stop collection harassment, and give you a fresh financial start.
But how does it work? Are payday loans dischargeable in bankruptcy? Which type of bankruptcy is right for you?
In this guide, we’ll break down how payday loans are treated in bankruptcy, key Wisconsin laws that protect borrowers, and what to expect from the process. If payday loan debt is overwhelming you, understanding your legal options is the first step toward regaining financial control.
Payday loans are short-term, high-interest loans. They’re designed to provide quick cash advances before your next paycheck.
Payday might seem convenient. Unfortunately, they often trap borrowers in a cycle of rollovers, late fees, and ever-growing interest rates.
Wisconsin has some of the country’s weakest payday lending regulations. Unlike other states that cap payday loan interest rates, Wisconsin has no maximum APR limit. This means payday lenders in Wisconsin often charge interest rates exceeding 500% APR, making timely loan repayment nearly impossible for borrowers.
“Wisconsin payday loan borrowers often face APRs exceeding 500%, making repayment nearly impossible without outside financial relief.”
Many borrowers take out multiple payday loans to cover the previous one. The result: a cycle of debt that’s hard to escape. This is where bankruptcy may provide a way out.
If you’re drowning in payday loan debt, bankruptcy could offer a legal way to eliminate or restructure what you owe. There are two main types of bankruptcy to consider:
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” allows you to wipe out most unsecured debts. This includes payday loans. However, there are some key things to know:
“Under U.S. bankruptcy laws, payday loans taken within 70 days of filing may not be eligible for discharge due to fraud presumptions.” – 11 U.S.C. § 523(a)(2)(C)
If your payday loan lender challenges your discharge, you may need to provide proof of financial hardship or demonstrate that you did not intentionally borrow without the ability to repay.
If you don’t qualify for Chapter 7 or want to protect certain assets, Chapter 13 bankruptcy might be a better option.
If you have a steady income but need relief from payday loan harassment, Chapter 13 might be a good solution.
In most cases, yes, payday loans can be discharged in bankruptcy. However, there are a few exceptions:
Most payday loans are unsecured debt. This means they have no collateral. This makes it easier to eliminate them in Chapter 7 bankruptcy.
It’s essential to understand the laws that protect you if you’re considering bankruptcy.
“In Wisconsin, payday lenders are prohibited from threatening criminal prosecution for unpaid loans under Chapter 427 consumer protection laws.”
| Feature | Chapter 7 Bankruptcy | Chapter 13 Bankruptcy |
| Eligibility | Must pass the means test | No income limit, requires a structured repayment plan |
| Discharge of Payday Loans | Typically dischargeable unless recent or fraudulent | Included in repayment plan, possible partial discharge |
| Time to Completion | 3-6 months | 3-5 years |
| Impact on Credit | Significant, stays on report for 10 years | Less severe, stays for 7 years |
| Best for: | Borrowers with low income and high debt | Those with a steady income who need structured debt relief |
Yes, payday loans are usually dischargeable in Chapter 7 bankruptcy. However, loans taken right before filing may not be discharged if they are considered fraudulent.
Yes. Once you file for bankruptcy, an automatic stay goes into effect. This stops payday lenders from calling, garnishing wages, or suing you.
Yes, if they believe you took out the loan without intending to repay it. However, most payday loans are successfully discharged in bankruptcy.
A Chapter 7 bankruptcy stays on your credit report for 10 years, but you can rebuild credit by making timely payments and using secured credit cards.
Yes. Options include debt consolidation, credit counseling, and negotiating settlements with payday lenders. However, bankruptcy is often the most effective solution for eliminating payday loan debt.
Payday loan debt can feel impossible to escape. However, you have options. Bankruptcy provides a legal way to eliminate or restructure your debt, helping you break free from the payday loan cycle and rebuild your financial stability.
If you’re considering bankruptcy, it’s essential to understand the process, know your rights, and explore all available options before making a decision. Both Chapter 7 and Chapter 13 offer relief, but the right choice depends on your income, assets, and financial goals.
At Debt Advisors Law Offices, we specialize in helping Wisconsin residents navigate bankruptcy and find the best path forward. If you’re struggling with payday loans and need guidance, our experienced attorneys are here to help you make an informed decision and take control of your finances.
Take the first step toward a debt-free future—reach out to Debt Advisors Law Offices today and learn how bankruptcy could provide the relief you need.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
