Bankruptcy Law Blog

Wednesday, March 30, 2016

Credit Card Debt: An Embarrassment, But Not of Riches

Who holds the highest revolving debt in the United States?

Most of us are well aware that revolving debt, including credit card debt, home equity loans and personal lines of credit, has risen sharply in this country. For many of us, this is a very personal issue since our own revolving debt is frighteningly high. According to a study by ValuePenguin, a New York-based financial company, by December of 2015, revolving debt had risen to $936 billion, up from $930 billion the month before. Credit card debt has reached its highest peak since the 2009 recession.

Ferreting Out the True Statistics

The study showed that average households in the U.S. now carry $5,700 in debt. While this may sound like a manageable amount, unfortunately, the reality is that the lowest income families and individuals are carrying the highest debt load.

Census Bureau and Federal Reserve Board reports differentiate credit card debtors into two categories: transactors, who pay off their credit card charges monthly and revolvers who carry credit card debt balances from month to month. It is the former who average the $5,700 amount in debt. For the revolvers, or balance-carrying households, the average amount of debt is $15,779. These debtors are also most likely to miss payments and are carrying their debt at interest rates as high as 18 percent.

These disturbing statistics point out the tail-chasing quality of credit card debt. Those who are least able to pay off their debts are paying the highest interest rates to begin with. As they make only minimum payments and sometimes miss payments, they accrue further fees and their debt becomes more and more insurmountable.

The Stigma of Debt Leads to Deception

No one wants to be in debt. In fact, there is such great stigma attached to being in debt that a great many people lie about how much money they actually owe. According to government data, there is an enormous discrepancy between how much lenders report lending ($683 billion) and how much borrowers report borrowing ($268 billion).

The figures show that people are more prone to lie about their credit card debt than about their mortgages or student loans. Apparently, there is far less stigma attached to borrowing to purchase a home or an education than to simply buy "things." According to NerdWallet, a personal finance information service, 70 percent of Americans believe that credit card debt is more shameful than any other type.

While, of course it is best to pay down your debt, paying off your highest interest credit cards first, in many situations this is impossible because of medical costs, for example, or job loss. If you have become overwhelmed with personal debt and are considering filing for personal bankruptcy, you should contact a reputable and experienced bankruptcy attorney to help you consider your best options.

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