Personal bankruptcies have reached nearly 1.6 million this year, a whopping 13.8 percent increase compared to the same period last year. This increase represents the largest number of bankruptcy filings since the Bankruptcy Abuse Prevention and Consumer Act was enacted five years ago, with hopes that fewer Americans would file for bankruptcy.
At the same time the Federal Reserve announced that consumers across the country reduced their revolving credit debt. Most revolving credit accounts are commonly associated with credit card debt. Revolving credit has been cut from $822.2 billion in August to $813.9 billion in September.
Americans successfully cut unsecured debt at an annualized rate of more than 12 percent, but much of this cut may be due to the 4 year high rate of bankruptcy filings. Experts bankruptcy filings may continue to rise in the coming months as unemployment holds near 10 percent and access to credit remains tight. Debt levels, underwater mortgages coupled with the high number of jobless continues to pose a serious risk to the financial health of Americans.
The counselors at Consolidated Credit encourage people who are having financial difficulties to seek help. Ignoring financial problems will only make things worse.
Counselors at Consolidated Credit offer these tips:
- Contact creditors before getting deep into debt.
Most creditors will work with consumers if circumstances such as a job loss, divorce, or illness have made it temporarily difficult for them to meet financial obligations.
- Eliminate credit cards and start living strictly on cash.
Living frugally allows consumers to accumulate less debt and pay current debts down faster.
- Track spending and keep an up-to-date budget.
After seeing where money is being spent people can then decide where to cut back and use that extra cash to pay down debt. A free budgeting guide can be found at www.consolidatedcredit.org.
- It is important to be adequately covered by insurance including medical, homeowners, and auto.
- Don’t assume that filing bankruptcy is the only option.
If consumers are having a hard time paying bills and feeling hopeless, they can get a free consultation from credit counseling agencies and find out if a Debt Management Program might be appropriate for them.
Many Americans are living on the financial edge and are still recovering from the devastation of the economic downfall that has taken place over the past three years, and in turn are finding themselves over extended and in serious financial trouble. Of the nearly 1.6 million bankruptcy filings for the fiscal year, ended September 30 for 2010, 1.1 million of those were Chapter 7 filings, up 15% from filings in 2009. Chapter 13 filings, where debtors typically are required to repay debts according to a budget plan that the court sets up, rose over 9% and Chapter 11 filings fell 3.8%.