Last year a man I’ll call David walked into my office to talk about bankruptcy.

David was the kind of guy that seemed to have everything in his life worked out. He was successful in his business, earning over 80,000 dollars annually, and had met many of his personal life goals. Yet here he was, talking with an attorney about something that he thought shouldn’t be possible: declaring bankruptcy. The first thing he said was “I want to pay people what I owe them.”

He felt it was difficult to even consider it. Like most of us, David had been raised to believe in taking care of himself and paying back debts. He believed in doing what was right, and he wondered if bankruptcy should even be considered. After all, wasn’t that “cheating?” Should responsible people even consider bankruptcy?

David’s Story

David had been doing fine with his life, paying his bills on time and being a model citizen. One day, though, he recognized he would need just a little extra money to take care of an unexpected expense. So he did what many people do every day: he went to a payday loan center and took out a two-week loan. Like many payday loan consumers, he felt that the two-week timeframe would allow him to avoid long-term debt and not burden his family. Instead, this loan would prove to destroy his finances.

When the loan came due, he paid what he could, but found he simply didn’t have enough to pay it all back that quickly. He had to take out another loan to pay off the original debt. Then another. And another.

In a matter of months, what had started as a manageable payment had spiraled out of control. No amount of belt tightening was enough. Interest on the payday loans had climbed to 4000 dollars a month. The payday loan was sinking his family finances. David wondered how somebody in his position, making a decent earning, taking care of his obligations, could have got into this situation. More importantly, how could he get out?

Freedom

First, we took a look at that loan system. Some quick calculations on the payments, time frame, and principal showed that they were charging him over 400% interest on his loans. This predatory practice made it impossible for David to ever escape.

With that in mind, and with his sincere desire to pay back his debts, we talked about a “Chapter 13 bankruptcy.” The Chapter 13 bankruptcy let us strip the interest from the payments and let David set up a straightforward payment plan to pay back not just the payday loan company, but all of his creditors.

With a road map laid out, and approval from the courts, David is now on the path to even greater financial security. He didn’t have to lose any of his property. He didn’t have to burden his relatives. He was able to create a solution that let him keep his promises and take care of his family.

Bankruptcy Can Be a Tool for Responsible People

I know there are many more people like David out there. Maybe you’re one of them. Maybe you are trapped in a payday loan. Remember: You are not a bad person if you can’t pay them back. The reality is that their predatory lending practices are designed to trap and enslave people. But there is help.

Bankruptcy isn’t a cure-all for financial woes. But it can often help people find the breathing room they need to get back on their feet.