Rising Consumer Debt and Delinquencies
Consumers decide to file for bankruptcy in order to deal with seemingly unmanageable debt, and to move forward with their lives without constant worry about finances. Consumer debt arises from many different sources, including credit cards, auto loans, medical care, and other unexpected but necessary expenses. According to a recent report from Bloomberg, U.S. credit card debt has risen significantly in 2019, and at the same time, more consumers are defaulting on loans, according to an article in Yahoo! Finance. What are the implications of rising consumer debt combined with increasing consumer defaults? Should more Americans consider the benefits of Chapter 7 bankruptcy or Chapter 13 bankruptcy to manage debt?
Credit Card Spending Declined in December But Rose in the New Year
According to the Bloomberg report, credit card spending among Americans was down during December and the holiday season, and spending began to pick up at the start of 2019. By the end of January 2019, the total U.S. credit card debt rose by $17 billion. At the same time, the amount of outstanding revolving debt also increased. In January alone, outstanding revolving credit rose by $2.57 billion. That is the amount that consumers are not paying off before the end of the cycle, and are carrying into the next billing cycle. Accordingly, consumers are being charged interest on that amount.
What does increased credit card spending mean? The report suggests that, as a baseline, it means “consumers remained ready to borrow, with activity propelled by the strong labor market, higher wages, and tax cuts.” At the same time, however, economic analysts anticipate that “consumption [will] cool” as we move through 2019, with less consumer spending into the spring, summer, and fall. Consumers also continued to borrow for other reasons in 2019, based on recent data. For example, student loans rose by about $26.6 billion, and non-revolving debt increased by about $14.5 billion.
Potentially Harmful Implications of Expanding Consumer Debt
While the Bloomberg reports suggests that increased spending means that consumers are confident and are willing to take out loans or use credit cards, the Yahoo! Finance article intimates that we should be wary of increased spending and reliance on consumer loans. To be sure, as consumer loan rates have risen, so have delinquencies, which the article describes as “a worrying trend that could indicate an economic slowdown is at hand.”
Most notably, consumers are facing delinquencies on credit card debt and auto loans. An analysis from Deutsche Bank suggests that, “when delinquency rates on consumer loans take a big dip as they are now, there is a likelihood that a recession could be on the horizon.”
If consumers are unable to make monthly payments on credit cards and other loans, and if interest rates make it impossible to stay ahead of debt, more consumers could end up considering bankruptcy as an option.
Discuss Your Situation with an Oak Park Consumer Bankruptcy Lawyer
If you have questions about consumer debt and bankruptcy, an Oak Park bankruptcy attorney can answer your questions today. Contact the Emerson Law Firm to speak with an advocate.
See Related Blog Posts:
Mistakes to Avoid When Taking the Chapter 7 Bankruptcy Means Test: Part I
Mistakes to Avoid When Taking the Chapter 7 Bankruptcy Means Test: Part II
Credit Card Spending Declined in December But Rose in the New Year
According to the Bloomberg report, credit card spending among Americans was down during December and the holiday season, and spending began to pick up at the start of 2019. By the end of January 2019, the total U.S. credit card debt rose by $17 billion. At the same time, the amount of outstanding revolving debt also increased. In January alone, outstanding revolving credit rose by $2.57 billion. That is the amount that consumers are not paying off before the end of the cycle, and are carrying into the next billing cycle. Accordingly, consumers are being charged interest on that amount.
What does increased credit card spending mean? The report suggests that, as a baseline, it means “consumers remained ready to borrow, with activity propelled by the strong labor market, higher wages, and tax cuts.” At the same time, however, economic analysts anticipate that “consumption [will] cool” as we move through 2019, with less consumer spending into the spring, summer, and fall. Consumers also continued to borrow for other reasons in 2019, based on recent data. For example, student loans rose by about $26.6 billion, and non-revolving debt increased by about $14.5 billion.
Potentially Harmful Implications of Expanding Consumer Debt
While the Bloomberg reports suggests that increased spending means that consumers are confident and are willing to take out loans or use credit cards, the Yahoo! Finance article intimates that we should be wary of increased spending and reliance on consumer loans. To be sure, as consumer loan rates have risen, so have delinquencies, which the article describes as “a worrying trend that could indicate an economic slowdown is at hand.”
Most notably, consumers are facing delinquencies on credit card debt and auto loans. An analysis from Deutsche Bank suggests that, “when delinquency rates on consumer loans take a big dip as they are now, there is a likelihood that a recession could be on the horizon.”
If consumers are unable to make monthly payments on credit cards and other loans, and if interest rates make it impossible to stay ahead of debt, more consumers could end up considering bankruptcy as an option.
Discuss Your Situation with an Oak Park Consumer Bankruptcy Lawyer
If you have questions about consumer debt and bankruptcy, an Oak Park bankruptcy attorney can answer your questions today. Contact the Emerson Law Firm to speak with an advocate.
See Related Blog Posts:
Mistakes to Avoid When Taking the Chapter 7 Bankruptcy Means Test: Part I
Mistakes to Avoid When Taking the Chapter 7 Bankruptcy Means Test: Part II
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