Many Michigan residents fall into inescapable debt when they use their credit cards to cover basic expenses after suffering a financial setback. According to the U.S. Federal Reserve, revolving debt in the United States increased by 1.5 percent to $1.037 trillion in July despite a thriving economy and historically low unemployment figures. Consumers sometimes take out payday loans or let their credit card accounts fall into arrears when money is tight, but experts warn that doing so can have dire financial consequences.
For Michigan consumers who are struggling to pay their credit card debts, it can feel impossible to catch up. In some cases, the balances outstanding are simply too high to pay down, and the cardholder might want to pursue debt settlement. Settling credit card debts is a legitimate process, but there are potential downsides that the cardholder should consider.
Credit card debt forgiveness may seem like an attractive option to Michigan residents who are struggling financially, but they may find that pursuing this course of action is futile because debt collectors expect a sizeable upfront payment before agreeing to forgive part of what is owed. Another problem with debt forgiveness is that it does little to help credit ratings as these offers are not generally made until accounts are seriously delinquent and credit scores have already plummeted precipitously.
Many consumers in Michigan and around the country are having difficulty meeting their financial obligations despite low unemployment, rising wages and sustained economic growth according to figures from the Federal Reserve Bank of St. Louis. The bank says that the credit card delinquency rate has risen from 2.12 percent during the second quarter of 2015 to 2.47 percent currently, which means that more than $20 billion in this type of revolving debt is currently at least 30 days past due.
An increasing number of elderly people in Michigan and across the United States are filing for bankruptcy, especially as wealth inequality continues to deepen. Several studies have indicated that older Americans are suffering from escalating financial problems. Between 1991 and 2016, the bankruptcy rate for Americans over 75 more than tripled. At the same time, bankruptcy filings for people between 65 and 74 went up more than two-fold. While a larger number of people are growing older as Baby Boomers retire, the growth in bankruptcies far outstrips the demographic changes.
Michigan residents who have filed for bankruptcy may be able to get a car loan after doing so. Those who have filed for Chapter 13 bankruptcy could be allowed to take on an auto loan during the course of their repayment period. Most who are seeking a car loan during or after a bankruptcy will work with a subprime lender. Such a lender will take a person's ability and willingness to pay when deciding whether to extend a loan offer.
The time period during which a person is struggling with asset depletion and avoiding a bankruptcy filing is sometimes referred to as the sweatbox. It's an unpleasant situation for Michigan residents who have to deal with collection calls and making decisions regarding the finances of basic life necessities. A report called "Life in the Sweatbox," which was recently published in the Notre Dame Law Review, focused on the impacts of delaying filing for bankruptcy.
For many people in Michigan struggling with debt, student loans can contribute substantially to the burden that they face. However, this type of debt is set aside from other unrepayable expenses like credit card bills; unlike those debts, student loans are not dischargeable in bankruptcy. As student loan debt and defaults continue to be a major concern across the country, the Department of Education has solicited input about how student loans can be dealt with in bankruptcy in the future. Over 400 comments were submitted as part of the process.
Filing for bankruptcy typically represents a low point in the financial lives of people in Michigan, but the chance to clear out debts offers opportunity for the future. A bankruptcy will linger on a credit report for at least seven years and impact an individual's ability to rent apartments or obtain loans. Despite this, people can rebuild their credit scores with proper money management.
Some Michigan consumers who feel overwhelmed by their financial obligations might consider filing for bankruptcy. Most types of unsecured debt can be discharge, but people should be aware that most tax liabilities cannot be.