Will increased credit card debt lead to more bankruptcies?
Over the last few years, some consumers in Louisiana have found themselves in a money crunch as prices have continued to rise, but wages have not kept pace. This money crunch has led to a significant rise in credit card debt as some households need to stretch their dollars. Others have started spending substantial amounts on vacations as they can travel again. Both situations have led to balances that they may be unable to pay.
Credit card debt can mount slowly
Frequently, consumers don’t realize that putting multiple purchases on their credit cards can lead them to bankruptcy. Making a small purchase here and there, plus buying more expensive items for birthdays or holidays can take its toll, especially if you only pay the minimum amount due per month. Before you know it, you have balances you can’t pay, especially if you have multiple credit cards whose issuers keep raising interest rates.
What are consumers using credit cards for?
You may have a utility bill due, and you don’t have enough money in your checking account. Although it may not happen the following month, you may have to pay by credit card a few months later. Then there are unexpected expenses like emergency medical bills, so the debt keeps mounting.
Is bankruptcy a solution?
Although credit card debt increased by 11% in January 2023, filing for bankruptcy may not be the solution for everyone. For example, when encountering unexpected medical bills, consider working out a payment plan with your provider instead of automatically putting the balance on a credit card. Many providers will allow you to pay over time without interest. If you have high credit card balances, consider bankruptcy alternatives like debt consolidation or debt settlement before heading to bankruptcy.
Bankruptcy is not an automatic solution, as filing will significantly impact your credit score for several years. Review your alternatives to determine whether Chapter 7, Chapter 13 or debt consolidation will be your best course of action.