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Photo of attorneys Shelley Slafkes and Bruce Levitt
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Consumer Credit: Houston, We Have a Problem

On Behalf of | Jun 5, 2018 | Bankruptcy Basics

Consumer debt is a very real, and very big problem for many Americans. And it is only getting worse. As of March of this year, consumers in the United States carried a total of $3.87 trillion in consumer debt. This astounding number is a historic record, which indicates that people are spending more money than they have at a record pace. With that in mind, it is important to remain informed for the sake of your financial future.

Revolving Consumer Credit

There are essentially two types of debt: revolving and non-revolving debt. Revolving credit involves debt that “revolves” every month. In other words, a borrower is obligated to completely pay off the debt every month or face a high interest payment. You may know these as credit cards.

Notably, last year, the four major US banks that issue credit cards reported that their credit card losses had jumped by a significant 20%. For example, Capitol One and Synchronicity banks both reported unexpectedly high credit card losses, which resulted in their stocks briefly tumbling.

Why does this matter? Because it is empirical proof that people are not using their credit cards as intended-as a revolving line of credit to be repaid each month. Instead, many people are over-using their credit cards more than ever, borrowing beyond their means, and finding themselves unable to even make a dent in their growing interest payments.

Non-Revolving Consumer Credit

Non-revolving debt involves larger loans that are paid off over a fixed period of time. This does not include mortgages, which are categorized as an investment in property that appreciates in value. Instead, non-revolving debts most commonly include student loans and car loans.

Car loans have been an increasingly problematic source of consumer credit, because dealerships and banks are offering low interest rates and pricing promotions. In addition, dealerships are doling out loans to people who are already struggling with debt in order to move vehicles.

An explanation for the increase in student loan debt is the rise of online, for profit, and community colleges, as well as an easier process of obtaining student loans, which have made a college education more affordable and accessible than ever. Yet, many students do not receive adequate counseling regarding interest rates; and worse, few students receive high enough salaries to be able to make even the minimum payments on their loans. This means they are trapped in years of simply paying off interest.

Let Us Help You Move Forward

Lenders make it very easy to get into consumer debt trouble. If you find yourself in a spiral of missed payments, transferring debt from one credit card to the next, and spending every last cent to pay down interest penalties, you need debt relief. At Levitt & Slafkes, P.C., we understand the law and how to get you back on track. Our attorney will listen to you and help you explore bankruptcy and other debt relief options. You can contact us at (973) 323-2953 to schedule a consultation, or you can reach us online.

We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years.