Credit Card Debt Causing Bankruptcy to Soar

Over the decades at our Memphis bankruptcy firm, we’ve seen people come in for every possible type of debt. But these days, credit card debt brings in more people than any other.

Why has credit card debt become such a high burden? What makes it especially dangerous in our current economy? And what can you do about it?

The Rise in Credit Card Debt

Credit card debt has always been a major issue for anyone contemplating bankruptcy. But in recent years, we’ve seen it have an outsized role in people’s decision to file.

Here’s what we think is happening:

Unsurprisingly, debt in general got worse during the pandemic. With nearly everyone facing financial strains in totally unexpected ways, many people put off payments out of necessity.

Then, soon after the worst of the pandemic ended, inflation rose. As costs got higher, salaries didn’t keep up. To put it simply, many workers don’t make enough right now to cover their basic living expenses. In fact, they don’t make enough to cover the basic cost of living in the United States.

As a result, many people put the extra cost on credit, hoping the economy, their fortunes, or both, will change.

Paying Off One Debt Over Another

In addition, most people haven’t received an education in credit or personal finance. Schools don’t really teach about budgeting, investing, or planning for the future. And so it should come as no surprise that we don’t know much about paying down debt wisely.

In general, there are certain debts you have to pay first. The most common of these is a mortgage. The federal government enforces a law that says you have to pay your mortgage over other debts. They believe it’s better for the economy to keep people in their homes and guarantee a steady income stream for the banks.

But not everyone realizes they should prioritize mortgage debt over credit card debt. In fact, for some people, the credit card companies pursue you harder than mortgage companies do. So you could easily mistake which one you should pay first.

Chapter 7 or Chapter 13? The Answer May Have Changed

In the past, when someone came to our office with a lot of credit card debt, we’ve often helped them with a Chapter 7. Chapter 7 clears your unsecured debts completely, including credit card debt and medical bills.

However, because of the above issues around mortgages and even car payments, the patterns have changed. These days, you may have chosen to pay down credit card debt instead of your mortgage or car payment. And as a result, you find out you’re at risk of losing your home or car.

In that situation, Chapter 13 often works better. In a Chapter 13, we help you set up a payment plan based on your specific financial situation. After paying into this plan, you’re caught up on your mortgage, you can keep your car, and your credit card debt is cleared.

How to Make the Right Choice for You

If you’re struggling with credit card debt you can’t pay, you likely feel incredibly overwhelmed. You may have people calling you demanding money. And you may feel discouraged watching your credit score collapse.

You need someone on your side who can talk with you through every possible option and help you make the right choice.

Our Memphis bankruptcy team has helped thousands of people in your situation – and we can help you, too.

We offer a free consultation, where we sit with you to discuss your goals and needs and help you make a smart decision about moving forward. We’ve built an award-winning team, known for our compassion and honesty, so you can rest assured you’re in good hands.

If you decide the best option for you is to move forward with bankruptcy, we will stand by you every step of the way. Your goals become ours, and we’ll never charge you extra for any additional questions or concerns as they come up.

There’s absolutely no charge to get started with a free appointment, and no strings attached. To talk with someone today about your situation, just contact us online or call us at 901-327-2100.