If you feel like your debt balances are continuously increasing or you’re struggling to keep up with payments, you’re not alone. In the third quarter of 2023, total U.S. credit card debt exceeded $1 trillion for the first time and continued to rise in the last quarter of the year. It’s not just credit card debt that’s increasing; Americans collectively owe $17.5 trillion in household debt, marking an all-time high.
The Rising Tide of Household Debt
Almost every type of household debt is on the rise, including credit card debt, auto loan debt, mortgage debt, and home equity lines of credit (HELOCs). The only type of household debt that has remained relatively stable is student loan debt, not because fewer people are taking out loans, but because interest on these loans was paused for most of 2023, and $160 billion in student loan debt has been forgiven.
Delinquencies Are Increasing Across Several Types of Debt
It’s not just the amount of debt that is growing; Americans are also finding it harder to keep up with their payments. This is a common theme we hear from people overwhelmed by debt, and it aligns with the significant increase in bankruptcy filings from 2023 to 2024.
In the last three months of 2023, a notable percentage of credit card debt and auto loan balances were 30 days past due. Credit card debt was more than twice as likely to reach 90 days past due compared to mid-2022. Additionally, the average balance of accounts in collection increased by more than 30%.
Who Is Struggling with Debt?
The short answer is everyone. Every age group experienced an increase in seriously delinquent credit card debt (90+ days past due), auto loan debt, and mortgage debt (except for the 60-69 age group).
However, the burden is not evenly distributed. Young adults (18-29) have the highest serious delinquency rates across all types of debt. Some reasons for this include:
- Lower median incomes: Younger adults often have less financial flexibility to absorb rising living costs.
- Higher interest rates: With less established credit, younger adults may face higher interest rates on loans.
- Inexperience: Younger adults generally have less experience managing finances, leading to costly mistakes.
Californians Are Doing Slightly Better
While California households have also seen an increase in seriously delinquent debt, their rates are the lowest among the 11 states specifically included in the report. States like Florida and New York have serious delinquency rates more than double those of Californians.
Next Steps if You’re Struggling with Debt
One of the biggest mistakes people make when dealing with delinquent debt is adopting a “wait and see” approach. It’s natural to hope that circumstances will improve, but vague hopes can keep you in financial limbo for years, costing you thousands of dollars.
Taking Control of Your Financial Situation
The first step when falling behind on debt is to assess your finances realistically. Be honest about your expenses and potential income. Factor in unexpected costs and avoid overly optimistic projections.
If your current income can cover all your living expenses, potential emergencies, and debt payments, create a strict budget and stay focused on paying down your debt. If not, explore your options:
- Decrease expenses: Look for consistent ways to cut costs.
- Increase income: Consider taking on a part-time job or finding other income sources.
- Negotiate with creditors: Try to arrange lower monthly payments or a lump-sum payoff.
- Consult a bankruptcy attorney: Sometimes, eliminating debt through bankruptcy is the most practical solution.
Sadly, many people wait years before seeking help, enduring prolonged financial stress. If your financial assessment shows that you cannot manage your debt, it’s crucial to explore your options immediately. For example, Chapter 7 bankruptcy can discharge burdensome debts like credit card debt and medical bills, allowing you to start fresh.
For personalized advice and support, contact The Law Offices of Paul Y. Lee at 951-755-1000. Our experienced attorneys can help you understand your options and take the necessary steps to regain financial stability. Don’t wait until it’s too late—reach out today for a free consultation.
