For Young Consumers Burdened by Debt, Bankruptcy Can Be Smart Long-Term Solution
Consumers in the U.S. now owe 11.4 trillion in debt, according to The Wall Street Journal.
If divided among all the households in the country, that would be $96,000 per residence.
However, a disproportionate amount of today's debt belongs to young people. As more young Americans take out large loans for college and struggle to find well-paying jobs, they are increasingly relying on credit cards to cover expenses they can't afford.
By the time you throw a mortgage into the mix, people in their 20s and 30s have created a snowball of debt that can trail them for decades.
While the flailing economy certainly hasn't helped, the biggest factor behind skyrocketing debt may be our culture. As the WSJ article suggests, easy access to credit has made it difficult for younger generations to delay purchases until they've built up the funds to pay for them.
Whether we realize it or not, credit has made us an instant-gratification society. Likewise, many consumers expect instant gratification when it comes to debt relief. That may be why young people avoid filing for bankruptcy - one of the best solutions for debt, but a process that takes some time and effort.
Unfortunately, debt doesn't disappear as easily as it accumulates.
When debt payments are large but still manageable, consumers should consider cutting back on their purchases in order to increase debt payments, before their debt spirals out of control.
If payments are already too big to handle, adding more debt is like throwing fuel on the fire.
Many young people avoid the most effective solution - filing for bankruptcy - because they fear the hit their credit will take. But while it's true that bankruptcy will stay on your report for up to 10 years, being young comes with the advantage of time.
If you're already drowning in debt, making minimum payments, and approaching or exceeding your credit limit, your credit is already suffering. Bankruptcy can rein in debt, putting you on the path to a future of lower interest payments and better terms. By the time you've saved enough to buy a home or a new car, your bankruptcy may already be wiped from your credit record.
There's a reason about 10 percent of people filing for bankruptcy are under age 25.
Though bankruptcy can't erase student loans, it can ease the pain of other bills - from medical expenses to credit card debt.
Bankruptcy may feel like the end, but for young people with many years to rebuild finances, it can be the beginning of a better financial future.
Wondering if bankruptcy could be a solution for your frustrating financial situation? Call the DebtStoppers Bankruptcy Law Firm at 800-440-7235 to schedule your free personal debt analysis with one of our bankruptcy attorneys.
More Blog Entries:
More Parents Struggling with Kids' Student Loan Debt in Chicago: August 1, 2012
Consumer Debt Seen Rising - Again, Anna Andrianova, The Wall Street Journal MarketWatch
Confront Your Debt, Rachel Louise Ensign, The Wall Street Journal