Lefkovitz & Lefkovitz
Nashville Office 615-686-2279 Cookeville Office 931-400-2218
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Nashville Bankruptcy Law Blog

Credit card debt levels increase in 2018

According to a report from NerdWallet, the average American household carries $7,000 in revolving debt. That is up from $6,081 in 2017, and this figure is important because it is a more accurate indicator of a person's financial health. Tennessee residents and others are experiencing wage growth, but higher prices are playing a role in increased credit card spending. Medical costs, student loan payments and food prices are causing expenses to outpace incomes for many.

Overall, Americans hold $13.51 trillion in debt, and the average household has $136,000 in balances owed to creditors. These balances include mortgages, car loans and any other type of debt a family may have. Credit card debt may be especially difficult to pay off, and roughly 9 percent of respondents to the NerdWallet survey say that they won't be able to ever repay their balances completely.

Consumer debt and cost of money on the rise

Analysts from LendingTree examined the rates of spending in November and predicted that the credit card balances of Americans would increase by at least 5 percent before the end of 2018. When the balances of credit cards rise, so does the cost of the associated debt service. People in Tennessee and across the U.S. spent more than $100 billion from January through November 2018 on credit card fees and interest, and annual percentage rates are higher than ever, averaging from 16 to 17 percent.

Debt overall is on the rise as well, with Yahoo! Finance reporting that consumer debt is expected to top $4 billion before 2019 begins. Since 2013, consumer debt has risen by $1 trillion. The consumer debt numbers break down into $2.9 trillion in student loans, auto loans and other non-revolving debt and $1.04 trillion in credit card debt. These consumer debt figures do not include mortgage debt. Non-revolving debt has increased by 30 percent and revolving debt by 22 percent since 2013.

Every bankruptcy is different. How would a filing benefit YOU?

Nobody enjoys being in debt or struggling to pay their bills. But it happens to almost all of us at some point in our lives. In many cases involving intractable debt brought on by an income loss, a divorce, an illness or another serious life event, effective legal relief is available to us through the courts. Bankruptcy is constitutional, and it's legitimate, no matter what the naysayers think.  

As you probably have heard repeatedly by now, bankruptcy is not for everyone. It is a powerful tool -- a financial "smart bomb" when employed strategically -- that should be used only under appropriate circumstances, with the right guidance.

Wait time to file Chapter 7 bankruptcy again

Many consumers in Tennessee who have accumulated debt they cannot pay back choose to file bankruptcy to stop creditors from calling and get a financial fresh start. Debtors can only file for a Chapter 7 bankruptcy every eight years.

Debtors who have previously filed for a Chapter 7 may be able to file another type of bankruptcy before eight years has passed. A debtor who wants to file a Chapter 13 bankruptcy can do so after four years have passed since they filed a Chapter 7 bankruptcy.

Credit card debt on the rise

People who are struggling with debt in Tennessee are not alone. The Household Debt and Credit report indicates that debt tied to credit cards rose by $14 billion during the second quarter of 2018 in the U.S. The average annual percentage rate on credit card debt is nearly 17 percent. Penalty APRs, which may apply after a missed payment, can be 30 percent or higher.

The country's total consumer debt is just beneath $14 trillion. Of that debt, $9.43 trillion is housing debt. According to the Consumer Credit Default Composite Index, a metric that accounts for mortgage, auto and credit card defaults, overall rates of default have remained steady for three years. In May 2009, the index hit a high of 5.51 before dropping down below 1.0 for approximately three years thereafter.

Thinking about debt: Are we headed for another recession?

For millions of homeowners, the difficulties of the 2007-2010 Great Recession are easy to remember. In many parts of America, inflated home values plummeted, abundant business seemed to dry up dramatically, and unemployment skyrocketed. Home equity lines of credit became much more difficult to obtain, and once-ubiquitous refinancing money became far more scarce.

Recent years have been fatter for homeowners, with home values rising significantly and unemployment dipping to low levels. But are we headed for another burst housing bubble? Should you be more concerned about your personal debts? What if you're considering bankruptcy in the wake of a personal financial problem?

Financial recovery after bankruptcy

Bankruptcy is commonly considered to be a financial disaster that's very hard to recover from. However, new data from financial experts shows that this may not be the case for all debtors in Tennessee. Nearly half of Americans who file for bankruptcy have their credit scores rise dramatically just a few years after filing. In addition, people who went through bankruptcy and raised their scores found that they could get similar mortgage and car loan rates to regular borrowers.

According to financial advisers, the key to rallying from a bankruptcy is to learn from the mistakes that created the problem in the first place. Once someone carefully considers their financial history, they can start looking forward. Building a good credit score is about paying bills on time and managing debt responsibly. There are many resources and tools available online to accomplish this goal.

Creating a debt repayment strategy

Household debt for those living in Tennessee and throughout the country increased by $63 billion in the first quarter of 2018. That was the 15th straight quarter in which household debt increased. Accruing debt may make it harder to achieve long-term financial goals, so it is a good idea to create a path to becoming debt-free or being able to better manage an existing debt load.

While bankruptcy may be an option for some, it is important to understand the pros and cons of doing so. It is also important to note that it isn't necessarily a viable option for those with student loan or other priority debts. Therefore, debtors may want to first consider creating a repayment plan with their lenders. It is worth noting that paying less than the entire balance may harm an individual's credit score.

Unemployment is very low, but many are still filing bankruptcy

It's a great American financial phenomenon: The economy appears strong and unemployment rates have bottomed out, yet millions of Americans are still struggling to make ends meet and pay all their bills.

With high levels of middle-class consumer debt creating a complicated picture, it's hard to understand where things really stand for the "average" person. It's important to realize that many people with "good jobs" and nice homes are considering bankruptcy as a way to get real debt relief.

When debt settlement could make more sense than bankruptcy

Filing for bankruptcy is often a prudent path to take for Tennessee residents who are struggling to make ends meet, but it is not the only way to escape unmanageable debt. It sometimes makes more sense to avoid the consequences of a bankruptcy by negotiating directly with lenders to reduce balances or arrange more flexible repayment terms. However, this kind of work may be best left to attorneys with experience in this area who have a strict ethical obligation to pursue the best possible outcome for their clients.

If you are struggling to make even minimum monthly payments on your credit cards or other bills, you may wonder why your creditors would consider reducing the amount you owe or lowering your interest rate. While this could seem counterintuitive, there are a number of reasons why lenders would consider making just this type of concession.

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Contact our Nashville office at 615-686-2279 or our Cookeville office at 931-400-2218. You can also reach us via email to set up a time to talk to us about your debts.

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Nashville Office
618 Church Street, Suite 410
Nashville, TN 37219

Phone: 615-686-2279
Fax: 615-255-4516
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Cookeville, TN 38501

Phone: 931-400-2218
Fax: 931-526-6244
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