What recovery? Credit card debt, arrearages expected to increase

March 01, 2013

What recovery? Credit card debt, arrearages expected to increase

Article provided by Law Office of Kevin J. Magorien
Visit us at http://www.kevinmagorien.com

It seems that the recent signs of economic recovery have done much to loosen many Americans' purse strings after several years of austerity. According to a recent report issued by the Federal Reserve Bank of New York, credit card debt rose by $2 billion in the third quarter of 2012, although the total debt held by Americans dropped $74 billion overall.

The credit bureau Transunion also reached a similar finding. The bureau found that the average amount of credit card debt held by Americans is expected to increase from $4,996 to $5,446 by the end of 2013. This is the highest it has been since 2009.

Additional data from Transunion seems to indicate that the recession is not yet over for many Americans. The bureau recently forecasted that the number of people who are more than 90 days overdue on their bills would increase in 2013.

Bankruptcy as a solution

People who find themselves unable to pay their bills may find bankruptcy a solution to their financial problems. Bankruptcy is especially useful for people who are overburdened with unsecured debt, which is debt that does not require collateral such as medical bills, credit card debt and personal loans. For filers who are qualified, bankruptcy can offer a fresh start by relieving the legal obligation to pay many types of unsecured debt.

Under the bankruptcy laws, individual filers typically have a choice between Chapter 7 and Chapter 13 bankruptcy. As each type differs greatly and has its own qualification requirements, the filer's personal circumstances generally determine which type is best for him or her.

In Chapter 7 bankruptcy, also known as liquidation, a bankruptcy trustee sells the filer's nonexempt property--property that can be sold under the bankruptcy laws--to pay debts. At the conclusion of the sale, the filer receives a discharge--a court order relieving the filer's responsibility to repay a debt--of many types of his or her debts.

In Chapter 13 bankruptcy, the filer's debts are consolidated and restructured into a payment plan. Under the plan, the filer makes an affordable payment each month for a three to five-year period to a bankruptcy trustee, who uses the money to pay creditors. The amount that the filer must pay each month is determined by his or her disposable income.

As long as payments are made under the plan, the filer may keep his or her property. After the payments have been made for a three to five year period, the filer receives a discharge for many debts that were not fully paid under the plan.

Consult an attorney

Each type of bankruptcy has its own qualification requirements, advantages and disadvantages. If you are considering bankruptcy, contact an experienced bankruptcy attorney who can recommend a debt relief option that would fit your particular situation.