Credit cards are a common way for people to purchase items they need or want. Some may overextend themselves. In Illinois and across the United States, as credit card debt increases and money becomes tighter, there is growing concern as to how people will make ends meet.
In some instances, they need to consider ways to clear debt. That might go beyond making the minimum payments and hoping for their situation to improve and thinking about bankruptcy.
Statistics show credit card debt has reached record levels
TransUnion reports that credit card debt reached more than $930 billion at the end of 2022. This was more than 18% higher than it was at the end of 2021. On average, people saw their debt rise by more than $5,800.
These are not from discretionary purchases. People are using credit cards to pay their rent and buy food. Another study by WalletHub claims that people are at a financial breaking point.
If people accrue unsustainable credit card debt, they are increasingly likely to fall behind on their payments. Researchers are closely monitoring how many people become delinquent. The current job market is believed to be strong, but recent events and raised interest rates could cause problems for some. The Federal Reserve raising the benchmark interest rate will make credit card interest rates go even higher putting a bigger squeeze on people who were barely making it by.
Some financial experts suggest reducing spending, clearing as much debt as possible, seeking credit cards that offer a low rate for a balance transfer or refinancing a home. While these can be effective for some, it is not an option for others. In many cases, bankruptcy could be a worthwhile idea to think about.
Bankruptcy could be an effective method to clear massive debt
Many people are reluctant to even consider bankruptcy due to the negative perceptions surrounding it. When the process is fully understood, it becomes clear that it is a useful way to get out of debt.
For those with credit card debt, medical bills and other unsecured expenses while owning a limited amount of property, Chapter 7 can simply clear the debt relatively quickly and allow them to move on. If a person owns a home or other items they want to retain, Chapter 13 could be preferable as it is a payment plan that lasts three or five years.
Regardless of which is better for their situation, it is essential to have help. Contacting professionals who understand the bankruptcy process and can assess the case and give assistance with moving forward and getting on better financial ground.