Bankruptcy

Do Not Put Up With Debt Collectors Harassment

Thursday, September 30th, 2010

There was an emergency and the need arose to take a payday loan. It seemed to be the fastest and the best option available then. However, now the debt collectors’ harassment is horrendous. The fact that using third-party debt collectors is against federal laws does not seem to matter to them. The Fair Debt Collection Practice Act clearly states that it is against the law for the creditors to contact third-party debt collectors to collect debts. The act further states that the use of harassment and threats is a violation of the law.

Harassment Tactics Of Debt Collectors

Debt collectors harass their client’s customers using various tactics. They send constant reminders through the mail. They call home everyday and sometimes twice or thrice a day. They are known to use profanity, humiliate publically, tarnish reputation, and give out false information about the debtor to outsiders, all with the intent of coercing them to pay off the debt.

The Way Out

Don’t think that there is absolutely no way out from the harassment of debt collectors who circle you like vultures. There are several options available.

1. Filing for bankruptcy is an option but need not be always a viable one. Payday loan bankruptcy is a common thing nowadays. Debtors who are neck deep in debt and who are constantly being harassed by debt collectors apply for bankruptcy to rid themselves of the trouble.
2. Another option is to report against the debt collector for violation of the law to the state Attorney General’s office. You can also send a cease and desist letter to the debt collector’s office. Although debt collectors’ harassment is a violation of the law, not everyone has the time or the money to go after the law, especially when a person is caught in debt.
3. A debtor can also approach payday loan consolidation lenders. The thought might occur—“Why take another loan when you are already loaded with debt?” This debt is quite different. Consolidation lenders help debtors to get out of their mess. They liaison with the creditors and get the debt collectors out of the picture. They set up a system through which the loans are paid off and there is no further need to contact the creditors. They charge lower interest rates and within a maximum period of 12 months get the debts discharged.

Do not fear debt collectors’ harassment. They can be easily managed through federal laws. A debtor can also get out of the trap of payday loans through loan consolidation companies or by filing for bankruptcy.

Payday Loan Bankruptcy – Not As Unlikely As You Assume

Wednesday, August 4th, 2010

Obtaining payday loans has become so easy that it tends to become a bad habit. A small amount of principal, the expectation of being able to repay by the next payday, promised discounts in payday loan fees for regular customers – these factors are likely to encourage repeated use of payday loans. Borrowers tend to forget that payday loans are an emergency backup plan. They should not be used for maintaining an expensive lifestyle or repaying other loans. Repeated use of quick cash loans can result in payday loan bankruptcy.

Does Relaxed Eligibility Lead to Bankruptcy?

In 2008, there were more than 10 million successful applications for payday loans. Getting a loan of this type is fairly easy. As long as you are a U.S. citizen over 18 years of age and have a full-time job, you can get a loan approved in as little as one minute.  Loan stores that formerly operated next to strip malls have given way to more accessible lending websites that do not even require the borrower to fax documents for obtaining a loan. The temptation proves too much for some people to resist.

If these loans can be returned quickly, generally within a month, why are numerous borrowing facing payday loan bankruptcy? The answer lies in a combination of factors. Once the borrower has successfully repaid the first loan, they are tempted to borrow again, even if they can get money elsewhere. Some borrowers start using these high interest loans to finance an unsustainable lifestyle.

High Interest Rate

The high payday loan interest rate also plays a role in the rising number of bankruptcies. Payday loan fees can be as high as 25% of the principal, meaning that you pay $25 on every $100 you borrow. This should be reason enough to deter most people from borrowing a second time, unless there is an emergency. However, many lenders offer “knockdown” rates to repeat borrowers, for example, 15% interest rather than 25%. The comparison seems attractive, and the unwary borrower walks into a loan trap.

Multiple Difficult Debts

Another reason for the popularity of payday loans is the lender’s promise to ignore the borrower’s credit history. Someone whose credit history is bad to start with cannot afford another high-interest loan. Accept a cash advance of this nature only if you are sure you can repay the loan by next payday.

If you have debts other than cash-until-payday, bankruptcy becomes an even bigger possibility. In their rush to clear their paycheck advance, borrowers forget to repay monthly installments of other loans. Credit card loans, for example, have a high interest rate as well. A combination of multiple high- interest, short-term loans can spiral into a problem of unmanageable proportions, often ending in payday loan bankruptcy.

Should you then stop taking out cash advances until payday? A better answer would be to use these loans more carefully. Borrow only when you need to, when no friend is in a position to lend you those precious few hundred dollars within the next 24 hours. Used the right way, payday loans are a great help during emergencies. Used the wrong way, they lead to payday loan bankruptcy.