Consumer debt has been rising dramatically in recent months, and the Federal Reserve says this is a sign that people are feeling more confident about the economy. However, as many Kansas residents know, there’s a less upbeat flip side to taking on credit card debt, student loans and car loans.
According to the Federal Reserve, consumers borrowed an additional $17.5 billion in March over the month before. This represented the biggest increase in years, analysts said.
Consumer debt fell during the worst years of the recession, as people reined in their spending and concentrated on paying down old debt. Now, analysts said, consumers feel safer making purchases. Retail sales have been on a slight upswing and credit card debt is increasing, though it is still short of its pre-recession levels.
It may be a good sign in many ways that consumers in general are feeling more confident about their economic prospects, but on an individual level this kind of confidence doesn’t always pay off. It’s easy to rack up credit card debt, but it can be very difficult to pay it off. When a job loss or other unexpected financial setback hits, a borrower’s delinquent payments pile up, the outstanding debt collects interest and before long consumers are caught in debt trap they cannot escape on their own.
There are ways to get out of this cycle of debt, each method with its own advantages and disadvantages. One of the fastest and most effective is through filing for Chapter 7 bankruptcy. This type of bankruptcy allows consumers to shed old debts, although it often requires selling off many assets. Chapter 13 does not require selling off assets, but it takes three to five years to complete. Some types of loans, such as student loans, can be more difficult than others to escape.
There are other options to get out from under credit card debt. Kansas attorneys can help consumers to choose a debt relief plan that fits their needs.
Source: The Wichita Eagle, “US consumer borrowing rose $17.5 billion in March,” Martin Crutsinger, May 8, 2014