In a Chapter 7 liquidation, payday loans are considered unsecured debt, therefore it will be eliminated. In other words, you are released from the obligation to pay it.
Sources:
http://www.avvo.com/legal-answers/il-state-law-regarding-payday-loans-and-debt-colle-9742.html
http://www.chapter7.com/what-is-chapter-7-bankruptcy/
http://www.tampabankruptcy.pro/chapter7.html
