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The alarm is sounded on consumer debt

Much was made of the efforts of millions of Americans to trim down their debt burdens and shore up their finances during the recent economic downturn. Experts noted how many people chose to spend their money a bit more wisely during the recession, and it was believed by some that perhaps that would translate into more financial security for many people as the economy improved. But, as always seems to be the case, as the economy has improved - albeit at a snail's pace - Americans are taking on more debt.

According to a recent report, overall consumer debt levels - including student loans, car loans and credit card debt - have increased to record highs. Student loans, in particular, have increased by approximately $100 billion each year over the last six years. The amount in outstanding auto loans has never been higher.

But, as the article notes, it is the amount of outstanding credit card debt that should be the most alarming. Why is that? Well, at least with student loans and auto loans a California resident is actually financing something that should have some value, in theory, both presently and in the future. And, these types of loans have a structured repayment schedule that helps consumers stick to making payments on time. Credit card debt, however, usually has the highest interest rates of the bunch, and rolling balances make it harder for a consumer to repay the debt.

For a California resident struggling with financial challenges, filing for bankruptcy may be an option. Credit card debt in particular can seem like a financial burden that an individual or family simply cannot overcome. A bankruptcy filing could result in a discharge of these debts.

Source: Bloomberg Businessweek, "Consumer Debt Hits an All-Time High," Allison Schrager, Sept. 30, 2014

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