Digging Deeper Into Debt With Payday Loans

Regularly advertised as an easy source of money, payday loans appeal to people with an urgent need. Bankruptcy and payday loans tend to go hand-in-hand because once you fall behind it can be virtually impossible to catch up.

The payday loan industry claims that these loans are meant to be a small, short term advance used to help a borrower meet their financial needs until their next pay day. The lender holds a check anywhere from a week to a month and in return, the borrower gets cash immediately. These loans unfortunately have extraordinarily high interest rates that more often than not leave a borrower worse off than before. At the time, borrowing this money seems like an appropriate option in an urgent situation, but what the borrower may not realize is that they are only digging themselves deeper into debt.

Lenders say that these loans are used only in emergency situations and over a short term period -- however this is absolutely wrong. A Wall Street analyst conducted a study and found that "the average customer makes 11 transactions a year, which shows that once people take [out a payday loan], they put themselves behind for quite some time(1)." Borrowing from paycheck to paycheck will only result in eventually defaulting on repayment.

In one situation a woman named Andrea Felts took out a loan to help cover expenses after her divorce. She took out a $400 loan and was charged $120 in interest for the 16 day loan period. When she wasn't able to pay the $520 she borrowed, she rolled over the loan for an additional $120 in fees. By the end she rolled her loan over a total of 5 times which resulted in $600 in fees on a $400 payday loan(2).

Once you are already struggling to make ends meet, taking out a payday loan can escalate an already dire situation very quickly and it's all too common for a borrower to eventually file for bankruptcy. For the most part, payday loans are considered unsecured debt and are treated as so during bankruptcy proceedings. Filing for Chapter 7 will allow a debtor to discharge their debt without repayment and essentially all unsecured debt is dischargeable. Under Chapter 13, the payday loan is treated equally along with all other unsecured debt in the debtor’s plan. .

If the loan was received within 60 to 90 days before filing, the loan may not be dischargeable in bankruptcy. The creditor will have the presumption they were taken out with no intention of being paid back. Also, if the electronic authorization or check written to the payday loan company “bounces” or is returned by the bank as insufficient funds, the payday loan company may refer the incident to the County prosecutor for bad check charges. If you are charged with writing a bad check, this is a criminal charge that is not dischargeable in bankruptcy.

If you find yourself submerged with debt and your payday loans are only aggravating the situation, contact one of our knowledgeable bankruptcy attorneys for more detailed information.

Footnotes:

(1) M. Anderson, "Cash poor, choice rich, Paycheck-advance firms move in," Sacramento Business Journal (Jan. 11, 1999).

(2) "Payday Lenders: small loans, hefty fees, big problem." Consumer Reports Magazine. 02 2009: n. page. Web. 28 Jun. 2012. <http://www.docstoc.com/docs/23437676/Consumer-Reports-Magazine-February-2009-Payday-lenders-small>.

Custody of Minor Children—What is “Best Interest?”

To make an initial custody decision, a Missouri court has the duty to examine eight various factors in order to make a best interest determination. Where the child wishes to reside is one of them, but not necessarily the determining factor. The court must also look at:

The wishes of the child's parents as to custody and the proposed parenting plan submitted by both parties;

If one of the parents fails to participate in a cause of action, his or her ability to present a case is adversely affected. There are occasions when custody is determined in favor of the party who has filed, primarily due to the second party failing to file an answer and participate in the outcome. 

The needs of the child for a frequent, continuing and meaningful relationship with both parents and the ability and willingness of parents to actively perform their functions as mother and father for the needs of the child;

The Missouri legislature has expressed a clear preference for joint custody if possible. It is accepted as true that a child needs both a mother and a father for optimal maturation. However, if one parent is hampered by addictions, absence, abusive behaviors or illness, the other parent could be found to be a more able and willing parent. 

The interaction and interrelationship of the child with parents, siblings, and any other person who may significantly affect the child's best interests;

How does everybody interact and deal with one another? If there are significant issues, the court will consider those.

Which parent is more likely to allow the child frequent, continuing and meaningful contact with the other parent;

Action by a parent that interferes with the ability of the other parent to have a relationship with the child will adversely impact their custody. Examples are refusing to call the child to the phone, refusing to keep each other advised as to significant events, refusing to schedule parenting time with the other parent.

The child's adjustment to the child's home, school, and community;

If a child is having significant adjustment challenges in a particular home, school or community, a more nurturing environment might be indicated. Issues with step-parents, inappropriate discipline, cult membership, lack of educational opportunity, etc. will be considered. One parent being more financially able than another will not be determinative by itself.

The mental and physical health of all individuals involved, including any history of abuse of any individuals involved. If the court finds that a pattern of domestic violence as defined in section 455.010 has occurred, and, if the court also finds that awarding custody to the abusive parent is in the best interest of the child, then the court shall enter written findings of fact and conclusions of law. Custody and visitation rights shall be ordered in a manner that best protects the child and any other child or children for whom the parent has custodial or visitation rights, and the parent or other family or household member who is the victim of domestic violence from any further harm;

If a court finds there has been abuse but there is little alternative but to maintain custody with the abusive parent, special findings of fact must be made and written into the final judgment.

The intention of either parent to relocate the principal residence of the child; and

Once the case has been filed, it is against the law for a parent to unilaterally move the child out of the jurisdiction. All such moves will have to be approved by the court in order to be legal.

The wishes of a child as to the child's custodian. The fact that a parent sends his or her child or children to a home school, as defined in section 167.031, shall not be the sole factor that a court considers in determining custody of such child or children.

When children reach the teenage years, they often suddenly express a desire to switch households. Cases require careful analysis, as the Disney parent might seem attractive in the eyes of the minor child.

Once the court has looked at all these factors, the best interest of the child can be determined.