The U.S. Consumer Financial Protection Bureau has a new name for payday loans and other short term loans-debt traps. Wisconsin residents facing short term financial challenges may need to consider other options for debt relief given this recent discovery.
Payday loans and other short term loans are marketed by banks and payday loan facilities as a solution to consumers’ debt problem but it really creates more debt as consumers struggle to repay the high interest loans and fees. These products can actually leave consumers in a cycle of financial emergencies as they literally “rob Peter to pay Paul,” as the saying goes. For these reasons, the CFPB is cracking down on this line of credit by suggesting tougher laws that may limit the negative effects of these potential debt traps.
Consumers caught in these debt traps or facing continuous cycles of financial challenges should be aware that Bankruptcy offers a fresh start and allows consumers to eliminate debt. A Chapter 7 bankruptcy may allow individuals to eliminate most unsecured debts, with the exception of certain taxes, student loans and child support obligations to name a few. A Chapter 13 bankruptcy will allow individuals to reorganize their debt while retaining their homes and repaying a percentage of their debt through a court approved payment plan. A Chapter 13 can also benefit those facing foreclosure by stopping the foreclosure process in certain situations. Both a Chapter 7 and a Chapter 13 bankruptcy can immediately stop harassing phone calls for payment of debt.
Wisconsin consumers who find themselves in a vicious cycle of debt that they cannot pay may consider discussing options with a debt relief agency. There are a number of debt relief options available to residents who are struggling with financial hardship.
Source: Delaware Online, “Payday loans get consumer bureau scrutiny as ‘debt traps’,” Carter Dougherty, Feb. 28, 2013
