Bankruptcy and Credit Card Debt

A recent study by the Federal Reserve included some much needed good news about the financial state of American households. There has been a significant drop in the amount of credit card debt U.S. families owe.

Perhaps more surprising is the reason experts say is behind this trend: more individuals are filing for bankruptcy. The amount of personal bankruptcy filings has grown from 822,590 filings in 2007 to over 1.5 million in 2010. During that same time period credit card debt has shrunk from a median balance of $3,100 in 2007 to a median balance of $2,600 in 2010, according to the Survey of Consumer Finances.

Moreover, fewer households now hold credit card debt. In 2007, slightly over 46 percent of families owed money on credit cards. In 2010, only 39.4 percent had credit card debt. The study found this decrease in credit card debt was widespread and impacted almost all demographic groups. The fact that Americans now have less debt puts them in a better position to rebound financially in the coming years.

Personal bankruptcy is often an effective way for people to achieve relief from credit card debt. In a Chapter 7 bankruptcy credit card debt, along with other forms of unsecured debts, can be completely discharged. Another option is filing for Chapter 13 bankruptcy. This allows you to craft a manageable repayment plan for your credit card debt and other financial obligations.

If you are feeling burdened by credit card debt a bankruptcy attorney can provide further guidance about your available options for relief.

Source: NPR, "Credit Card Debt Cut: The Reason May Surprise You," Marilyn Geewax, June 12, 2012.