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Credit card debt in America passes $1.04 trillion

The amount consumers in Virginia and around the country owe to banks and credit card companies is expected to surpass $4 trillion by the end of 2018. This figure, which reflects revolving and installment debt but does not include mortgage balances, has risen by $1 trillion in just the last five years. Experts voiced few concerns over growing consumer debt levels when interest rates were close to historic lows, but a recent wave of rate hikes with the promise of more increases to come have prompted them to start issuing grim warnings about credit bubbles and unsustainable borrowing.

Navigating out of credit card debt

For many people in Virginia, debt is becoming a growing crisis. In the first quarter of 2018 alone, household debt increased by $63 billion in total across the United States. This marked the 15th consecutive quarter of growing debt burdens for consumers across the country. In total, Americans have $13.21 trillion in personal debt, including $815 billion in credit card debt and $1.23 trillion in auto loan debt. For many people, debt can seem manageable for a time, but when a crisis hits, it gets harder and harder to pay the bills each month.

Rise in credit card delinquencies worries economists

Figures from the Federal Reserve suggest that a worrying number of consumers in Virginia and around the country are finding it difficult to make their credit card payments on time despite a robust economy and low unemployment. The credit card delinquency rate in the United States now stands at an alarming 2.47 percent. That figure was 2.42 percent at the beginning of 2017 and 2.12 percent in early 2015. This means that about $23 billion in this type of revolving debt is currently 30 or more days past due.

The automatic stay in personal bankruptcy

When Virginia residents file Chapter 7 or Chapter 13 personal bankruptcy petitions, an injunction known as an automatic stay is issued. This injunction is designed to give individuals the time they need to put their financial affairs in order, and it places strict limits on creditors. While the automatic stay is in force, efforts to repossess assets or garnish paychecks must be abandoned, and attempts to collect unpaid debts must cease. Creditors who willfully ignore these rules may be ordered to pay punitive as well as compensatory damages.

Debt and interest rates to rise in 2018

Americans spend about 10 percent of their monthly income on debts such as auto loans and credit cards. While that may not be a dangerous level for most people, it is a good idea for Virginia residents to know where that debt is going. As a general rule, student and auto loans are easier to manage compared to credit card debt because of the difference in interest charged.

Credit card debt could become costlier

Many people in Virginia and across the country are struggling with overwhelming debt, especially as credit card fees and interest rates mount. In March of 2018, the U.S. Federal Reserve announced an increase in the federal funds interest rate from 1.5 percent to 1.75 percent. Even though this rate is not a consumer rate and reflects a bank-to-bank lending rate, it is used as a benchmark for consumer loans, credit accounts and even savings accounts. An increase in the federal funds rate means that interest rates on consumer debt rise as well.

How does bankruptcy affect your children?

Bankruptcy can be an intimidating process when you do not know what to expect. You worry about your current and future financial security, you worry about losing property, you worry about how you are going to rebuild your credit, and you may even wonder how it will affect your children.

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