Archives for August 2013

PayDay Loan

Payday loans are short term loans with extremely high interest rates.  Typically the term of the loan is your next payday.  Interest on payday loans is very high.  Payday loans are legal in Ohio.

JUSTICE DEPARTMENT TURNS UP HEAT ON PAYDAY LENDERS – WALL STREET JOURNAL

Payday advances signThe Wall Street Journal posted today that the “Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including on-line payday lenders” WSJ.

Payday loans are short term loans at high interest rates. These types of loans are legal in Ohio. In Delaware Ohio they are very noticeable. All you have to do is drive down South Sandusky Street in the City of Delaware and you will find 2 or 3 locations within about a half a mile.

According to the article, a spokesman for the Online Lenders Alliance said that the Justice Department’s actions “would cut off an important credit choice for millions of underserved consumers”. I personally have a problem with that statement. These “underserved consumers” do have few credit choices, and when they chose to borrow from a payday lender or cash advance company, they become trapped in a viscous cycle that they cannot escape.

Payday Loans are Legal in Ohio

As an Ohio Bankruptcy Attorney, where payday loans are permitted, I see many clients who have borrowed from these institutions. The stories are not pretty. Every pay period they have a couple of options: 1) pay the loan plus fees in full; 2) pay the fees and borrow again, causing the balance to grow larger; 3) don’t pay and risk the payday lender trying to cash their check, causing overdraft fees and further financial damage.

Payday Loan Collections

Collections start when a payday loan prisoner does not make good on the loan. Granted, we have become a little more civilized in the last 50 years and you should not have to worry about some goon breaking your kneecaps, but the collection tactics are still deceptive and unsavory. The collectors for these companies try their best to intimidate the borrower into paying the money. Many times they announce themselves as Investigator Smith or Investigator Hughes or Investigator (fill in the blank). They call friends and family about the debt. They call you and threaten to have you arrested the next day if you don’t pay, and you may be arrested at work. They truly scare many people. They are ruthless. They have a job to do and that is collect money, period. They don’t care about you.

Payday Loan Collection Protection

The good news is that these collection practices are illegal. If you have payday loans and have been called by an Investigator or someone else trying to scare you into paying the money, seek legal help. You have rights and you have protections. Filing a complaint against the collector for unfair and deceptive collection practices might be an option. Just hiring an attorney to make a few calls might be all you need. You still owe the debt but you don’t have to be abused. Filing bankruptcy can make the debt disappear for good.

Payday Loan Industry Growing

Online payday lending grew 10% in 2012 and accounts for nearly 40% of all payday lending, according to the WSJ article. Our economy has not fully recovered and people are still getting further into debt. Payday loans are not helping consumers, they are trapping more and more in a downward debt spiral.

photo by: HelenCobain

SHOULD I HIRE A BANKRUPTCY ATTORNEY OR BANKRUPTCY PETITION PREPARER

As a general rule of thumb, if you are planning to file for bankruptcy protection you should hire an experienced bankruptcy attorney. You can hire a bankruptcy petition preparer or do it yourself, but these two options generally may not save you money in the long run and the experience may not be pleasant.

Filing a Chapter 7 Bankruptcy is not an easy task. My Chapter 7 case filings average about 50 pages in length. They contain a tremendous amount of information. But filing alone is not the end of the process. Provided that all of the required documents are filed, you still have to send copies of certain information to the Chapter 7 Trustee by a specific date. You are required to appear at the Bankruptcy Court for your Section 341 Meeting of Creditors, which is where the Chapter 7 Trustee will question you about the information filed. Even if all goes well, you still may need to file additional documents before you receive your discharge.

WHAT COULD GO WRONG

Whether you proceed on your own or hire a bankruptcy petition preparer, chances are that something will go wrong.
I witnessed “something going wrong” today during a Section 341 Meeting of Creditors at the Bankruptcy Court for the Southern District of Ohio. The debtor had hired a bankruptcy petition preparer. They paid the BPP $650.00. What the debtor got was the three page Petition and the two page Exhibit D. That’s about 1/10 of the required documents for $650.00. The debtor had to take her papers to the Bankruptcy Court and file them herself. When she got to the Section 341 Meeting, she had no-one there to help her when the trustee started asking questions. (I do commend the trustee in this case who was extremely courteous). Although the Chapter 7 trustee and the Assistant U.S. Trustee were trying to get this lady back on track, it is hard to say what will happen. The meeting of creditors will probably be rescheduled, causing her to come back to court again. It is also possible that her case will be dismissed.

And, the she still owes the Bankruptcy Court $306.00 for the filing fee.

YOU COULD LOSE YOUR PROPERTY

Keep in mind that the Chapter 7 Trustee works for your creditors. Her job is to find assets of yours that can be liquidated and paid to your creditors. Fortunately for Ohio debtors, you get to keep most if not all of your stuff. There are limits however, and I have had many clients with exposed assets. Because they hired an attorney they were aware of the risks before the case was filed.
So, the very minute you file for protection under Chapter 7, the trustee is theoretically in control of all of your assets. The Chapter 7 Trustee has a lot of power, and remember she works for your creditors. Her job is to find assets for your creditors. She is not interested in protecting you.

If you have assets that cannot be protected or you fail to assert your protection, and you file Chapter 7, the trustee is going to take your stuff. Well, maybe not everything, but things of value like cars, cash, and your home.

YOU MAY NOT GET A CHAPTER 7 DISCHARGE

As I mentioned earlier, if you don’t file all of the required documents and/or fulfill your duties, your case could be dismissed. You don’t get a discharge of your debts if your case is dismissed.

THE BOTTOM LINE

Hire an experienced bankruptcy attorney. One that will explain the bankruptcy process and answer your questions. Hire an attorney you can trust, someone that will be with you when you meet the Chapter 7 Trustee at the meeting of creditors. If you want to reduce the headaches and frustrations and get a fresh start, you should hire a bankruptcy attorney.