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Bankruptcy Law Blog

Wednesday, February 28, 2018

The United State's Debt

$13.15 Trillion In Debt And Counting

Over the last few weeks, there has been a lot of news coverage of the federal budget and the national debt. Looking at the U.S. Debt Clock right now shows that our federal government is over $20 trillion in debt. State governments are over $1.1 trillion in debt, and local governments are almost $1.8 trillion in debt. As taxpayers, we are all on the hook for that debt in the long run. In the short run, however, personal debt is more of a concern. It isn’t shown on the Debt Clock or talked about much in the news, but American families hold $13.15 trillion in debt.

According to the Federal Reserve Bank of New York’s Center for Microeconomic Data, which keeps track of consumer debt by pulling anonymous data from a representative same of Equifax credit reports, American families now how more debt than they did before the 2008 financial crisis. Of the $13.15 trillion in consumer debt, the largest portion, $8.88 trillion, is mortgage debt. $444 billion in home equity line of credit debt, $1.38 trillion in student loan debt, $1.22 trillion is auto loan debt and $834 billion in credit card debt. 

The economists at the Fed don’t consider the growing amount of consumer debt to be anything to worry about. In fact, to them, it is a good thing. Families who are going into debt are doing so to improve their lives. They are buying homes and cars, paying for education, and taking care of their families’ needs. Banks are lending out all this money because they are confident most of it will get paid back. Both the families and the lenders are showing optimism about the future, and that’s a good thing. 
What is not such as good thing is the debt that will not get paid back. The Fed estimates that $619 billion of the $13.15 trillion in debt that American families hold is delinquent. Of the $619 billion that is delinquent, $406 billion is seriously delinquent, which the Fed defines as at least 90 days late. Some people are going to be able to pay off of the past due debt that they owe and get back on track, but others are going to need to file for bankruptcy in order to get back on their feet. 
Banks and other lenders assume that some of the money they owe is not going to be repaid. Some borrowers are going to file for Chapter 7 or Chapter 13 bankruptcy and have their debts wiped away or settled for pennies on the dollar. The lenders know this, but they still make loans. Bankruptcies are built into the financial system. They just happen sometimes and there is nothing the lender or the borrower can do about it. The way to move forward is to go through the bankruptcy process and come out the other side with a fresh perspective.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”