Charge Card and Loan Delinquency Rates Soar
How to Clear Credit Card Debt with a Debt Solution
Jul 9, 2009
March 2009 Federal Reserve figures showed that the revolving credit, a widely used interpretation of outstanding credit card debt, stood at $939.6 billion. ABA Chief Economist James Chessen said that: "Consumers tend to rely on credit cards as a bridge to cover their daily needs until they find new jobs," Chessen said. "It's taking longer to find those jobs."
Credit Card Default and Loan Delinquency Statistics
- The number of loan payments that were at least 30 days late rose to 3.23% in Q4 of 2008.
- The credit card default rate increased from 5.52% to 6.6% at the end of 2008.
- Late payments on home equity loans reached a new record, rising from 3.03% to 3.52%. It also rose from 1.46% to 1.89% on home equity lines of credit.
* Statistics provided by the American Bankers Association.
Why Loan Delinquency Rates are Rising
Rising unemployment is the main reason behind the escalating credit card default and loan delinquency rates. Chessen stated that: "When people lose their jobs or work fewer hours, it makes it that much harder to meet their obligations. Unfortunately, we're going to see higher job losses in the next year, and I expect elevated delinquencies."
- Unemployment has reached a 26-year high of 9.5%. In excess of 6.5 million jobs have been lost since the commencement of the economic downturn in December 2007.
* Statistics provided by the Bureau of Labor Statistics.
Debt Solutions That Help with Credit Card Default and Loan Delinquency
- Debt Management Plan (DMP). A Debt Management Plan is a voluntary agreement with creditors to make a reduced monthly payment until any outstanding debt is paid-off.
- Debt settlement plan. A debt settlement company negotiates with creditors to clear credit card debt. Although charges are front-loaded, personal debt can be eliminated in 3 to 5 years. This debt solution is ideal for credit card default.
- Chapter 7 bankruptcy. Suitable for individuals who wish to clear credit card debt. This debt solution allows those without non-exempt assets to become completely debt free in 4-6 months.
- Chapter 13 bankruptcy. A debt solution that allows individuals to keep their non-exempt assets in return for monthly payments over either a 3 or 5 year period.
As credit card default and loan delinquency rates continue to increase due to rising unemployment, consumers need to identify a suitable debt solution. It is possible to manage or clear credit card debt with a Debt Management Plan, chapter 7 bankruptcy, debt settlement plan or chapter 13 bankruptcy.
Sources
Jones, Brent. (8 July, 2009). "Consumers falling behind with payments at record pace." Reuters.
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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