Michael D. Hart, P.C.

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Not all credit card debt is created equal

| Feb 12, 2018 | Chapter 13 Bankruptcy |

Federal Reserve data indicates that credit card debt in the United States passed the $1 trillion mark in 2017. This may have implications for the financial health of Virginia residents and others. A study by CreditCards.com sought to rank the 25 most populous cities by the average amount of credit card debt residents held. Washington, D.C., had the most debt with the average person having a balance of $7,442.

However, the amount of debt a person has doesn’t necessarily determine their ability to pay it off. For instance, while Washington, D.C., residents had the highest debt, they also had the highest median income. Therefore, they likely felt the burden of their debt the least. According to the survey, residents of San Antonio, Texas, actually had the highest debt burden. It would take a person living there 22 months to pay off their debt if they put 15 percent of their gross monthly income toward that balance.

Someone living in San Antonio would have to pay $911 in interest in addition to the principal balance. This assumes an average interest rate of 13 percent. Someone living in Seattle would only take 15 months to pay down their debt, and residents there would only pay $577 in interest. Those with credit card debt are urged to start reducing their balances as interest rates may begin to rise.

Those who are having trouble paying down their debt may benefit by filing for Chapter 13 bankruptcy. This may make it possible to put an end to creditor phone calls or postpone a potential foreclosure or repossession. Individuals who are interested in filing for bankruptcy may want to talk to an attorney to learn who is eligible to file for Chapter 13 protection.