The average American’s debt hits records levels this year. The previous record holder was a collective $1.02 trillion in 2008 just before the Great Recession. The average American’s debt has now hit a collective $1.021 trillion – the highest it has ever been.
Average American’s Debt Hits Record Levels
We should all treat this as a huge wake-up call. Higher debt levels increase the risk of default when borrowers cannot service the debt. Current interest rates are also historically low resulting in easy access to credit. For the first time since the Great Recession, lenders are offering consumers with poor credit scores record amounts of credit. Each of these phenomena point to one conclusion – another recession is coming. It is just a matter of when.
Differences in Debt Types
One large difference between 2008 and today is that the debt type is different. Ask anyone “what was at the crux of the 2008 crash?” and they will tell you “the real estate market”. And they would, for the most part, be correct. However, today’s debt looks much different. Housing-related debt is now down; however, student loan debt is up $671 billion and auto loans are up $367 billion. Multiple factors such as the decrease in the perceived value of home-ownership and an increase in the cost of higher education contribute to this new mix of debt type.
What is the Solution?
Needless to say, there is no silver bullet. Each individual’s situation differs. Some may need to simply cut back on non-essential spending (eating out, online shopping – sorry Amazon). Others may need to investigate more acute solutions such as debt settlement or credit repair. In many cases, either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy may eliminate most, if not all, of the debt. Which option best suits you is going to depend on a number of factors. The most important questions to consider are: are you currently delinquent; how much debt do you have; what assets do you own and what are they worth; and how much money do you make?
If you have questions about debt or bankruptcy, contact The Law Offices of Dax J. Miller today to learn more.