Back in business? Credit card debt on the rise

March 01, 2013

Back in business? Credit card debt on the rise

Article provided by Ambrogio, Pletter & Associates, LLC
Visit us at http://www.ambrogiopletter.com/

During the recent recession, consumer fears about the economy changed the way that Americans spend and save, encouraging consumers to slash their total credit card debt load. However, according to a recent report issued by the Federal Reserve Bank of New York, it seems that old habits die hard. The report found that domestic credit card debt increased by $2 billion in the third quarter of 2012.

This finding was also confirmed by a separate report from Transunion, one of the major credit-reporting bureaus. According to the report, the average amount of credit card debt held by Americans is expected to rise from $4,996 to $5,446 by the time that 2013 is over, making it the highest it has been since 2009.

Although such a trend could be construed as a sign that the economy is returning to "normal," a second report from Transunion indicates that this is unlikely for many. The report forecasted that the number of people who are more than 90 days overdue on their bills would increase in 2013.

Consumer options

With unemployment, underemployment and stagnant wages an ever-present problem for many Americans, many find themselves unable to pay their bills. If you are in this situation, bankruptcy may be a solution. It is especially useful if you are overburdened by unsecured debt--debt that is not secured by collateral, such as credit cards, medical bills and personal loans.

Individuals typically have two types of bankruptcy available to them: Chapter 7 and Chapter 13. Each type has different benefits and qualification requirements. The type of bankruptcy that would be right for you depends heavily on your personal situation.

In Chapter 7 bankruptcy, also called liquidation, a bankruptcy trustee sells any nonexempt property to pay for your debts. Nonexempt property includes assets that are not commonly held by many people, such as vacation homes, expensive musical instruments or stamp collections. As a result, most people do not lose any property in the Chapter 7 bankruptcy process. Once any nonexempt property has been sold, you receive a discharge, relieving you of the obligation to repay many types of debts.

In Chapter 13 bankruptcy, your debts are restructured into a payment plan. Each month during a three to five-year period, you make a payment to a bankruptcy trustee who uses the money to pay your creditors. The amount you pay each month is determined by your disposable income. As long as you make timely payments under the plan, you get to keep your property. Once you have completed making payments under the plan, you receive a discharge of many of your outstanding debts.

If you are overwhelmed by debt, it is important to seek the advice of an experienced bankruptcy attorney. An attorney can recommend a debt-relief option based on your personal situation and ensure that your best interests are protected throughout the process.