Consumer Debt Reaches New High

If you are currently managing a substantial amount of debt, chances are good that you are not alone. According to a recent report from Consumer Affairs, consumer debt has reached a new high of about $14 trillion. That information comes from the Center for Microeconomic Data, which is part of the Federal Reserve Bank of New York. The consumer debt included in that figure includes debt from a variety of sources, including “mortgages, credit cards, student loans, personal loans, auto loans, and all other forms of consumer debt.” While some consumers may be able to manage debt, others are struggling with it.

We want to discuss the rise in consumer debt and to consider options for dealing with debt.

Consumer Debt Amounts Steadily Rising
The $14 trillion amount of consumer debt is part of a rising trend. According to the article, “the total has been rising for 21 straight quarters and has now surpassed the previous high reached in the third quarter of 2008, just as the financial crisis hit.” In some ways, the debt is a sign of consumer confidence. At the same time, however, the amount of debt also means that consumers are taking more risks that could end up backfiring.

As the article explains, the fact that consumer debt is rising means that consumers “are more willing to take on debt to finance new spending.” For many of those consumers, it feels safe to do so because the economy appears to be strong and fewer consumers are unemployed. In other words, many consumers who are taking on debt are doing so under the assumption that they will be able to pay it back.

Yet taking on a significant amount of debt can be risky, especially if the economy shifts. The article refers back to 2008 “when the global financial system nearly collapsed overnight and unemployment shot up to 10 percent.” As a result of the financial crisis, a very high number of consumers with significant debt ended up filing for bankruptcy or facing foreclosure—and many did not anticipate ever facing bankruptcy or foreclosure when taking on the debt initially.

Particularly High Rate of Mortgage Debt
While student loan debt and credit card debt certainly makes up a large portion of the total consumer debt of $14 trillion, the largest amount of the debt is actually in the form of mortgages. For many consumers with mortgage debt, this is a good thing in comparison to 2008 since most of the home loans “have fairly low fixed interest rates,” and “the payments are often comparable to or lower than what consumers would pay to rent a home.”

However, the amount of student loan debt is a problem. In the most recent accounting, student loan debt has now reached a total of $1.5 trillion, and credit card debt has risen over $1 trillion. For some consumers, taking on so much debt in these forms ultimately may result in bankruptcy.

Contact an Oak Park Bankruptcy Lawyer
Dealing with consumer debt can be difficult and complicated. If you have questions about bankruptcy or other options for managing debt, a consumer protection advocate at our firm can help. Our Oak Park bankruptcy lawyers regularly assist clients throughout Oak Park and Chicagoland. Contact the Emerson Law Firm today for more information.


See Related Blog Posts:

Can I Seek Emotional Distress Damages in a Bankruptcy Case?

Mortgage Tax Debt and Bankruptcy

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