Addressing the Growing Household Debt and Delinquency Crisis

If you feel like your debt balances keep creeping upward or you’re falling further behind on your payments, you are not alone. In the third quarter of 2023, total U.S. credit card debt topped $1 trillion for the first time and continued to increase in the following months. Americans collectively owe a staggering $17.5 trillion in household debt, an all-time high.

If you believe now might be the time to contact a bankruptcy attorney, call Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free consultation.

The Rising Tide of Household Debt

The increase in household debt spans across various categories, including credit card debt, auto loan debt, mortgage debt, and home equity lines of credit (HELOCs). The only type of debt that has remained relatively stable is student loan debt. This stability is primarily due to the temporary pause on interest in 2023 and the forgiveness of $160 billion in student loan debt.

The Surge in Delinquencies

Not only are Americans carrying more debt, but they are also struggling to make timely payments. The last quarter of 2023 saw a significant rise in delinquencies, with a substantial percentage of credit card and auto loan balances becoming 30 days past due. Credit card debt was more than twice as likely to be 90 days past due compared to mid-2022, and the average balance of accounts in collections jumped by more than 30%.

Who is Struggling the Most?

The short answer is “everyone.” All age groups experienced an increase in seriously delinquent credit card debt (90+ days past due). Similarly, auto loan delinquencies increased across all age groups, and mortgage delinquencies rose for everyone except those aged 60-69.

Young adults (18-29) are particularly affected, with the highest serious delinquency rates across all debt types. This age group faces several challenges, including:

  • Lower median incomes, which offer less budget flexibility to absorb rising living costs.
  • Less established credit histories, resulting in higher interest rates on loans.
  • Less experience in managing finances, leading to mistakes that can compound financial difficulties.

California’s Relative Resilience

While Californians have also seen an increase in seriously delinquent debt, the percentage is the lowest among the 11 states specifically included in the report. States like Florida and New York have serious delinquency rates more than double those of California.

Next Steps if You’re Struggling with Debt

One common mistake people make when dealing with delinquent debt is taking a “wait and see” approach, hoping circumstances will improve on their own. This often results in prolonged financial stress and wasted money.

Practical Steps to Take

  1. Evaluate Your Financial Situation: Conduct a realistic assessment of your income, expenses, and potential emergency costs. Determine if your current income can cover all your living expenses, emergencies, and debt payments.
  2. Create a Budget: If your income covers your expenses and debt payments, create a detailed budget and stick to it. If not, consider the following options:
    • Reduce Expenses: Look for ways to cut costs consistently.
    • Increase Income: Consider taking on a part-time job or finding other income sources.
    • Negotiate Debt: Speak with your creditors about lower monthly payments or lump-sum payoffs.
    • Seek Professional Help: Consult with a bankruptcy attorney to explore options like Chapter 7 bankruptcy, which can discharge burdensome debts such as credit card debt and medical bills.

Don’t Delay in Seeking Help

Unfortunately, many people endure years of financial stress before seeking professional help. If your financial assessment indicates that your current strategy isn’t working, it’s time to explore your options.

Some debts can be discharged in Chapter 7 bankruptcy, providing a fresh start and the opportunity to rebuild your financial foundation. If you’re struggling with debt, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free consultation. Our experienced attorneys can help you understand your options and guide you towards a more stable financial future.

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