In today's economy, it is no surprise that many Americans struggle with debt. Business is still not back to where it once was, and although the economy is improving, there is still a long way to go. Because of these difficult times, it is also no surprise that credit card debt is on the rise.
The Federal Reserve Bank of New York has released a quarterly report on the nation's debt, and although the total debt dropped by $74 billion in the third quarter, there has been a significant rise in credit card debt over this period of time. Credit card debt, car loans and student loans have all increased over this time period and present very real concerns. The current trend could lead to a troubled future for many.
Credit cards bring in a lot of money for banks because banks are able to get the money they lend to consumers at very low interest rates. Banks are then able to give out credit cards to consumers for very little risk, but by charging consumers high interest rates banks can reap a huge reward.
Credit cards are becoming more appealing to consumers. Debit cards have recently undergone changes, which make the credit card a better and cheaper option for many consumers. With fees and disappearing debit rewards, many Americans would rather have a credit card. The problem, however, is that it is much easier for consumers to spend large amounts of money that they do not have when a credit card is in the picture.
Bankruptcy as a solution
When times get tough and individuals are faced with a large amount of debt, they are not without a solution. Although bankruptcy has historically carried a negative stigma, it is now seen as taking a responsible step in the right direction. Considering bankruptcy as an option when faced with debt can provide a person with the opportunity to have a fresh start.
A Chapter 7 bankruptcy eliminates most types of a consumer's debts and allows individuals to start over with their finances. Filing for bankruptcy stops creditor harassment because as soon as a bankruptcy petition is filed the court issues an automatic stay. The automatic stay prevents creditors from taking any further actions to collect debts such as garnishing wages or levying bank accounts.
Another option that provides relief is a Chapter 13 bankruptcy. A Chapter 13 bankruptcy allows people to make payments into a court approved plan over a period of three to five years. At the end of this time period, most of a person's remaining debts will be discharged. A Chapter 13 bankruptcy can also be used to defend against a home foreclosure. Most people who file for bankruptcy are able to keep their possessions.
If you are struggling to deal with mounting debt, it is a good idea to speak with an experienced bankruptcy attorney about your options. Bankruptcy attorneys are sensitive to their clients' problems and will present all options available to get them back on track financially.