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Consumer credit card debts continue their rise

On Behalf of | Jan 26, 2023 | Chapter 7 Bankruptcy

During difficult economic times, credit card debt among consumers skyrockets. Over the past year, balances have ballooned for the first time since the pandemic’s beginnings. Assistance programs have disappeared while significant inflation has skyrocketed interest rates.

The third quarter of 2022 saw U.S. citizens with $925 billion in credit card debt, an increase of $38 billion from the previous period. The 15 percent year-over-year increase is the largest in more than 20 years. By way of reference, Q4 of 2019 to Q1 of 2021 saw credit card balances drop from $930 billion to $770 billion. Experts cite pandemic assistance programs and avoidance of large crowds and travel playing a role in that reduction.

The Federal Reserve raised interest rates in early 2021, making borrowing even more expensive. Add consumers falling behind on installments made a bad situation that much worse. Credit card companies are not shy when it comes to their aggressive collection tactics, starting with increased interest rates and other fees in response to late payments.

The option of bankruptcy

Should the financial problems and shortfalls continue, consumers could see their accounts sent to debt collectors. Usually, that move ramps up creditor harassment with collectors calling homes and workplaces, not to mention countless correspondence filling up mailboxes.

Bad situations worsen when credit card companies lead to a lawsuit, something that no consumer struggling with financial problems can ignore. Legal fees add to the balance with the possibility of wage garnishment.

If you’re thinking about filing bankruptcy for credit card debt, you first need to understand that, in most cases, credit card debt is considered unsecured debt. Secured debts, including a mortgage, can also be targeted by creditors, who can foreclose and take the property away when payments stop.

For many consumers, bankruptcy is a last resort that provides some initial relief. The automatic stay bars creditors from taking additional action until the legal process is over. Help from an attorney can provide options toward a new chapter in life free of creditor harassment.