Less Take-Home Pay Risks Debt Payments?

Since the recession many local families have had an immensely difficult time paying down their debts and staying afloat financially.  As Oak Park bankruptcy lawyers, we are acutely aware of the challenges that remain.  Many still are not making as much money as they were before the recession and others are still unemployed.

Yet for all of the doom and gloom, the past few years have seen a slow but clear rise in economic activity.  This has translated in increasing ability for consumers to pay back their debts.  That is exactly what was explained in a recent American Bankers Association (ABA) article on consumer debt trends.  The ABA noted that the third quarter of 2012 saw strong repayment of consumer debt.  Specifically, the ABA noted that the delinquencies on bank card payments fell to an 18-year low in the third quarter of last year.  In this context, delinquencies are defined as payment that are 30 days late or more.

Problems on the Horizon?
On the face of it, of course, this is good news.  Consumers are slowly getting onto more comfortable financial ground and able to pay their obligations on a more consistent basis overall.  Though this does not mean that everyone is out of the woods.  Many families are struggling.  On top of that, there are concerns that the positive signs might slow in 2013.

There is worry that tax changes in the new year will limit take-home pay and make it slightly harder for debt obligations to be met.  In particular, as part of the “fiscal cliff” compromise bill, an old payroll 2% tax cut was rolled back.  This has a direct impact on the take-home pay for everyone, with employees losing that percentage off the top of their paycheck automatically.

One ABA spokesman suggested that “Changes in payroll withholding will decrease disposable income, reducing retail sales and making it more difficult for some people to meet their financial obligations."

Beyond the payroll tax, the fiscal cliff compromise also altered income taxes for those making over $400,000 ($450,000 for couples), capital gains tax rates for those same income groups, and slightly altered estate tax rules.  However, because those taxes affect a far smaller percentage of Americans--and ones who are generally in better financial shape--it is the payroll tax alternation that has more people concerned.  It will be important to watch developments closely to see how it alters the country’s overall economic trajectory.

Oak Park Bankruptcy
All local community members from Oak Park, River Forest, or nearby communities should know that the attorneys at our firm are here to help with long-term financial problems.  The option of bankruptcy exists specifically so that you can have a fresh start.  To learn more contact our office today.

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