Lately, many Americans have been forced to live paycheck to paycheck. Even if you’re not living like this now, there’s a good chance it might be in your future. Many companies are continuing to downsize in this economy leaving a higher risk for the possibility of unemployment. It’s no fun to not be able to pay your bills and put it on the table at the same time. During these stressful times of wondering how you feed your family many consider taking out a payday loan to float their family. This is usually a last resort for those that have already tapped out their credit cards and savings. The downside to this is, there are severe consequences for taking out these loans. Recently, a law school released the study saying 90% of first-time payday loan users end up filing bankruptcy. Those are very good odds, if you consider that 9/10 file for bankruptcy after taking on this kind of debt.
How a payday loan works is really simple. First, you give your paycheck in advance to the payday lender and the lender gives you the amount on the check less the lending fee, typically about 20%. The term of the loan lasts until the lender cashes the check, which is typically around two weeks. This all seems fair until you consider how much of your paycheck you’re eating up, just to get a little cash in advance. For instance, if you had a $500 check and owed the lender 20%, they would give you $400 for your paycheck. In essence, you now have less money to live on. Usually, this creates a pattern, where the debtor can’t get ahead enough to break this cycle.
Before using these payday loans it’s better to consult a bankruptcy attorney about filing bankruptcy. When filing for bankruptcy the debtor will be able to stop paying all the credit card payments and other debts that are taking up a lot of the budget that could be used to pay household expenses. If a person is still working, having this extra money will quickly get them caught up. The goal of filing bankruptcy is to be debt-free in the end. Hiring a bankruptcy attorney can help the debtor negotiate the complexity of the bankruptcy code and help them get the fresh start that bankruptcy was created for.