What can happen if I defaulted on a payday loan?

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What can happen if I defaulted on a payday loan?

I had some paydays loans that I just have not had the money to make payments. I have someone calling me telling me if I don’t pay them today they are going to issue an affidavit. Is this legal? I am thinking of filing for bankruptcy. I want to know that if I file will this affidavit issue be resolved?

Asked on November 12, 2011 under Bankruptcy Law, Pennsylvania

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The person who told you about the affidavit does not know what he or she is talking about.  An affidavit is just a declaration signed under oath. 

Until you are served by a process server with a lawsuit (summons and complaint; the complaint is the lawsuit), you need not do anything.  When you are served with the summons and complaint, you will need to file an answer to the complaint with the court within the time set forth in the summons.  If you don't timely file an answer to the complaint with the court and serve it by mail on the opposing party, the opposing party could get a default judgment against you.  That means you will have lost the case by default.  If that happens, you will need to file a motion to set aside the default.  If the judge grants your motion to set aside the default, the case will then be back on track and litigation will continue.  Until there is a judgment against you, it would be premature to file bankruptcy because you would not know the amount of the judgment.  Your income and other factors will determine if you are eligible to file Chapter 7 bankruptcy.  Chapter 7 is straight liquidation which eliminates your debts.  If you are not eligible to file Chapter 7, you will need to file Chapter 13 bankruptcy.  Chapter 13 requires a plan (budget) for repayment of creditors.


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