Many Americans are struggling to pay their bills each month and are facing the possibility that a bankruptcy filing might be in their future. When individuals tap out their credit cards they end up only being able to pay the minimum payments to keep the creditors off their back. The downside to this is many of these people can barely afford to live. One little problem like a flat tire or a medical problem and their financial problems takes on a new complexity. Some of these people facing these kinds of financial problems run to payday lenders to get by. The only problem with payday loans is your robbing Peter to pay Paul. It won't take long to end up filing for bankruptcy when you are being prepaid for your paycheck minus 20%. Borrowing in this fashion will only compound a debtor's financial difficulties.
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Most people believe that payday loans are secured by the check and that you can't discharge them in bankruptcy. That's what the payday lenders want people to believe, because in reality, payday loans are a form of unsecured debt. Filing Chapter 7 bankruptcy wipes out all of unsecured debt in the discharge. And yes, this includes payday loans also. It would be pretty hard to get the fresh start that filing bankruptcy promises, having a loan shark hanging on your back. Chapter 7 bankruptcy requires that the debtor lists all their debts and assets. Considering this, since all means all, a debtor is required to include any payday loans they have outstanding anyway. The beauty of filing for bankruptcy is these will be wiped out in the bankruptcy discharge.
When an individual decides to use a payday lender they are required to turn over a post dated check for collateral. Many people believe because of this, the debt is secured by the check and if the debtor doesn't make good on this check, they will go to jail for not honoring their loan. This is far from the truth, to be guilty of writing a check that is worthless, the lender has to prove that the debtor had the intent of defrauding them at the time the post dated check was given to them. When the lender accepts a check they know it is not good. The good news is, the debtor does not need to worry if they are going to file for bankruptcy. In fact, once the bankruptcy is filed the lender will not be even able to contact them to discuss the matter because an automatic stay is in place. The automatic stay in a bankruptcy filing stops all collection activity and contact between the debtor and creditor. This stops all phone calls, lawsuits, wage garnishments and judgments from being filed.
The payday loan industry uses the marketing tactics that they are helping a desperate person on a one-time basis. In reality, they are taking advantage of a person that is financially vulnerable with nowhere else to turn. The facts speak for themselves, the annual interest rates that these lenders charge work out in the area of 400% to 600%. This doesn't seem too much like they are doing anyone any kind of favor. The interest isn't the only problem, because many times these desperate people have trouble repaying the loans, they end up having to pay penalties and fees to roll the loan over. Most individuals that get caught up in these loans end up paying close to double of what they borrowed.
Ask any bankruptcy attorney about the payday loan industry and you can be sure they will have some stories to tell you. When things get to the place where an individual feels they need to use a payday loan to get by, these should first consult a bankruptcy attorney to see of filing bankruptcy might be a better option. The reason Congress created Chapter 7 bankruptcy is to give an individual a second chance at their financial future by giving them a fresh start.
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