People in Louisiana and across the country are facing increasingly high levels of household debt. In the second quarter of 2018, household debt increased for the 16th consecutive reporting period, reaching close to $14 trillion in collective debt. While $9.43 trillion is classified as housing debt, usually in the form of home mortgages, consumer debt is also on the rise. Credit card debt is increasing, but statistics indicate that default rates are still on the decline.
However, this may not fully indicate the effect that credit card debt is having on American families. Credit card debt alone grew by $14 billion in the second quarter of the year, and interest rates are also on the rise. The average annual percentage rate has risen to 17 percent, much higher than the interest rates for home mortgages, student loans and some other types of debt. When people miss payments, that APR could rise rapidly; penalty rates could reach nearly 30 percent after late or missing payments. Once fees and penalty rates begin to rack up, credit card debt can become increasingly insurmountable.
After six months of missed payments, the credit card issuer may order a charge-off, putting the account into default. Even though missed payments would affect a person’s credit score long before, a charge-off is a bigger penalty. It doesn’t extinguish the debt; instead, it is often sold to a debt collection agency.
People who are facing crushing amounts of credit card debt may be unsure how to sustain their future. This can even be the case when people have a relatively good job but also major demands on their income, including family expenses or child support. A bankruptcy lawyer may help people develop a plan to seek debt relief, including potentially filing for Chapter 13 bankruptcy to eliminate or restructure debt.