When a borrower misses a payday loan payment, the lender can charge a fee for the missed payment and make an attempt to collect the debt. The lender may cash the check it has on file, which could trigger the check to bounce at the debtor's bank, states Washington Law Help. Payday lenders may decide to send a defaulted account to a collections agency.
Defaulting on a payday loan can cause a lot of financial difficulties for the debtor, as lenders act quickly to collect the money, according to Washington Law Help. Fees and costs of trying to recover the funds can pile up. Borrowers in this situation sometimes are forced to close a bank account because of excessive fees that cannot be paid. Debtors also can expect to receive phone calls and letters from a collection agency regarding the unpaid loan. According to Credit.com, a settlement amount can sometimes be negotiated to resolve the debt.
Declaring bankruptcy is a drastic step, but it can free the debtor from the defaulted payday loan, states Credit.com. It is a myth that payday loans cannot be included in a bankruptcy, add Credit.com. This type of unsecured loan can be discharged the same as regular loans.