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Some debtors still face large credit card debts

As New York residents may know, the amount of credit card debt has changed since 2006. Credit card debt in the U.S. rose until January 2009, when it peaked. At that time, America had been in a financial crunch for about six months. The amount of debt fell sharply until 2010 when it reached a lower point than it was in 2006. While the number of households with credit card debt fell and plateaued, the average debt remained constant.

The fall in the economy in 2008 meant that credit card lenders saw a rise in defaults and subsequently tightened regulations on lending after 2010 and limited the type of borrower who could qualify. To balance the amount of debt creditors could not collect, they wrote off large amounts of delinquent debt in 2010. The rate of charge offs rose more than 300 percent from 2006. Overall, household debt fell but not because debtors were able to pay off the balances.

There is still a large discrepancy between the average household credit card debt owed, $7,281, and the $15,608 owed by indebted households. For indebted households, this amount of debt added to an average of $154,847 in mortgage obligations and an average student loan of $32,397 means some households are still deeply in debt.

Since the falling debt is often due to charge- offs and defaults, the level may not reflect an improved economy. For some families, particularly those facing unemployment or medical debt, paying off these obligations may be a daunting task. In order to start over, they may wish to consult an attorney concerning the option of filing for Chapter 7 bankruptcy. There are eligibility requirements associated with Chapter 7 that the attorney will explain.

Source: NerdWallet, “American Household Credit Card Debt Statistics: 2014“, Tim Chen, December 08, 2014

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