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In debt to payday loan sharks? Consider bankruptcy

Those who struggle to live paycheck to paycheck can be tempted to make ends meet by taking out one or more payday loans. But this highly detrimental practice can land you in even more financial hot water.

In addition to being a form of usury for the sky-high interest rates the companies charge borrowers, a study by the Consumer Financial Protection Bureau focused on financial behaviors of those who use payday loans to get by. What they discovered was both surprising and worrisome.

One might expect that those earning the least would take out the loans with greater frequency than those with higher incomes, but only 12 percent of borrowers earning no more than $10,000 annually depended on these loans. Those who made between $10,000 and $20,000 per year made up 31 percent of borrowers. Right on their heels were those who earned only slightly more — 30 percent of payday loan borrowers' salaries topped out at $30,000.

Depending on payday loans to see you through emergencies is a sign of serious financial trouble. These short-term fixes can wind up gobbling up paychecks with fees and interest rates. Even if you pay off the loan by your next payday, you still pay much higher rates than those charged by traditional lenders.

But most consumers stay in debt to these companies far longer than a couple of weeks; the median number of indebted days is 199, or over half of any given year. A quarter of payday loan borrowers stayed in debt for as long as 300 days.

If you find yourself caught up in the destructive cycle of borrowing and debt, it may be time to make a major financial overhaul. Declaring Chapter 7 bankruptcy clears the slate on your finances and allows you to make a fresh start unencumbered by the burden of payday loans.

Source: Veterans United, "The Hidden Danger of Payday Loans," Christian Losciale, accessed June 17, 2016

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At the law offices of William H. Oliver, Jr. & Associates in Toms River and Lakewood, New Jersey, we represent clients in Toms River, Neptune, Trenton, Middletown, Red Bank, Wall, Lakewood, Lakehurst, Manchester, Asbury Park, Old Bridge, Jamesburg, Barnegat, Forked River, Manahawkin, Ocean Township, Brick, Manasquan, Howell, Freehold, Hazlet, Bradley Beach, Brown Mills, Long Branch, Keansburg, Marlboro, Bayville, Beachwood, Whiting, Sayreville, South River, East Brunswick, Monmouth County, Ocean County, Middlesex County, Burlington County and Mercer County.