Is bankruptcy the right option for you?
American debt is skyrocketing to record highs, with $17.5 trillion in personal debt as of the last quarter of 2023. The average amount owed nationwide is more than $100,000 per household.
Many households are swimming in debt, but a lifeline is available. In South Carolina, declaring bankruptcy can significantly relieve overwhelming debt burdens when individuals or businesses can't make ends meet.
The Motley Fool Ascent recently released a nationwide analysis of household debt. Here's what's behind America's debt.
What's driving record-high personal debt?
Since 2020, the average household debt has increased 10 percent. Much of this increase has been linked to the crushing inflation accompanying COVID-19. While prices have come down a bit, data indicates that many Americans are relying on credit to pay for bills and monthly expenses. The average American household has over $6,000 of monthly revolving credit card debt. Credit card debt is not the biggest contributor to the dizzying $17.5 trillion debt. Researchers broke down and categorized the expenses that got us here.
- Total American household debt - $17.5 trillion
- Total mortgage debt - $12.25 trillion
- Average mortgage debt - $244,500
- Total auto loan debt - $1.6 trillion
- Average auto loan - $23,800
- Total credit card debt (4thQ 2023) - $1.13 trillion
- Average household credit card debt - $6,088
- Home equity revolving debt - $360 billion
- Average HELOC value - $42,000
Most of the debt - about 70 percent - is structured in mortgages. However, researchers flagged two types of debt as concerning due to their increased percentage of the average individual's total debt - auto loans and "miscellaneous" debt, which includes past-due medical bills. About 23 percent of South Carolina households note medical expenses as a significant factor in debt accumulation.
10 signs you should consider bankruptcy
About 10 percent of the average American household's income is spent paying down debt every month. Some people can get out of debt by paying a little every month while massive interest rates compound and charges accrue.
However, for many people, this simplistic cookie-cutter approach isn't going to work. The data shows that the credit card delinquency rate is nearing 3 percent. Faced with these and other financial obstacles, declaring bankruptcy is the smartest solution for thousands of hard-working people.
Here are 10 signs that it may be time to consider bankruptcy:
1. Overwhelming debt surpassing assets and income: If your debts far outweigh your assets and income, making it impossible to keep up with payments, bankruptcy may offer relief from crushing financial burdens.
2. Constant collection calls or legal actions from creditors: Persistent harassment from creditors, including collection calls, letters, or legal actions like lawsuits or wage garnishments, indicates a serious financial crisis that may warrant bankruptcy protection.
3. Struggling to afford basic necessities due to debt payments: If debt payments consume a significant portion of your income, leaving little left for essential expenses like food, housing, and utilities, bankruptcy may provide a path to financial stability.
4. Reliance on credit cards to pay bills: Using credit cards to cover daily expenses or make minimum payments on existing debts is a sign of financial distress and may indicate the need for bankruptcy protection to break free from the cycle of debt.
5. High debt-to-income ratio: A high debt-to-income ratio, where your monthly debt payments exceed a significant portion of your income, can make it challenging to manage debt effectively and may signal the need for bankruptcy relief.
6. Depleted savings and retirement funds: Liquidating savings accounts or retirement funds to pay off debts is a temporary solution that can jeopardize your future financial security. Bankruptcy may offer a fresh start without depleting your retirement nest egg.
7. Exhausted other debt-relief options: If you've explored other debt-relief options such as debt consolidation or credit counseling without success, bankruptcy may be the next logical step to regain control of your finances.
8. Negative impact on mental health due to financial stress: Financial stress can take a toll on your mental and emotional well-being, affecting your relationships, job performance, and overall quality of life. Bankruptcy can alleviate this burden and provide peace of mind.
9. Significant reduction in income: A sudden loss of income due to job loss, reduced hours, or medical disability can make it impossible to meet financial obligations. In such cases, bankruptcy can offer a fresh start and relief from overwhelming debt.
10. Facing legal judgments, liens, or tax debts: Legal judgments, liens on property, or unpaid tax debts can have serious consequences and may warrant bankruptcy protection to prevent further financial hardship and protect your assets.
If any of these signs resonate with your financial situation, it is crucial to seek guidance from an experienced South Carolina bankruptcy attorney. An attorney can assess your circumstances, explain your options, and guide you through the bankruptcy process to achieve a brighter financial future.
People from all walks of life use bankruptcy
Americans are carrying more debt than ever before, and more of that debt is due to car loans and medical care than in past audits. Many struggling individuals, families, and businesses could benefit from bankruptcy. Unfortunately, there's still a stigma attached to "going bankrupt." The reality, however, is that many people need to take this important action to get their lives back on track.
Bankruptcy is simply a legal term used to describe the reorganization and/or elimination of debt. At Benjamin R. Matthews and Associates, LLC, we've seen first-hand how bankruptcy helps honest, hard-working people solve their financial problems. Find out if bankruptcy is the right option for you. Contact us today.