Chapter 13 bankruptcy may be better solution than payday loan

Payday lending stores have seemingly become an integral part of society. Yet, their negative impacts may go unnoticed. Although they may appear to be a quick, convenient solution to financial troubles, other consumer tools, like filing for Chapter 13 bankruptcy, may be far more effective.

Mississippi is one of the states with the highest number of payday loan stores. There is about one store for every 10,000 residents. And typically, these stores situate themselves in low-income areas - essentially preying upon those who are already suffering from financial challenges.

Payday lenders may appear to offer a great financial option to individuals with lower income. However, quite the opposite is true. A recent study by the Insight Center for Community Economic Development reveals that these lenders actually create more financial challenges. They strip low-income individuals of their much-needed income and plunge them into further debt. In fact, several million dollars have been lost.

Fortunately, there are other solutions that offer effective debt relief. One solution is filing for Chapter 13 bankruptcy. Many Mississippians may not recognize this as a solution, however, because filing for bankruptcy can appear daunting. But, filing for bankruptcy is relatively straightforward once the steps are identified. First, an individual files a petition in the state in which they live. Next, the individual should include several financial documents with the petition, including a list of assets and debts, income and other financial affairs. The individual must also pay some fees. The bankruptcy court will then appoint a neutral trustee to work on the case to collect payments from the individual and pay creditors. During this time, the court will place a stay on all collections so everything is processed through the trustee, if possible.

In the end, filing for bankruptcy will not come with additional fees, interest and payments like payday loans. Instead, an individual will have a sense of real debt relief.

Source: Atlanta Daily World, "Payday Lending Drains Nearly $1 Billion From Communities," Charlene Crowell, April 1, 2013

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