Since the Great Recession began, most Americans, including those from Long Island, New York, have tightened their belts. The increasing cost of household expenses and unemployment has subjected most people to financial challenges and many are eventually forced to declare personal bankruptcy. However, recent reports confirm that the economy started to improve during the first quarter of 2013.
As a result, there was an increase in consumer borrowing. According to sources, Americans increased their borrowing by $19.6 billion in May compared with April. The figure was considered the largest increase since the $19.9 billion of consumer credit in May 2012. While the consumer credit has increased, credit card use has also increased. Credit card use has reached $6.6 billion while credit card debt has increased to $847.1 billion. The consumer credit report from the Federal Reserve also highlights the growth of borrowing in terms of student loans and auto loans. Experts said that this category sharply rose because most people used the loans to pay for college.
It may be true that consumer spending drives the growth of an economy. However, categories included in the Federal Reserve's borrowing report illustrate how most people acquire personal debts. Interest rates may exist in consumer debt which may accumulate if the borrower fails to pay it in full and on time. Consumer borrowing is common, but once it gets out of hand, New York debtors may find themselves struggling financially.
Despite this, New York residents with overwhelming debt have an option, which is Chapter 7 bankruptcy. With Chapter 7 bankruptcy, debtors may obtain a fresh financial start if they meet certain requirements. Filing Chapter 7 involves the liquidation process wherein tangible assets will be sold and the proceeds will be used to pay the debts. While Chapter 7 may introduce some disadvantages, it may eliminate all the debts that can be discharged within two to three months and stop creditor harassment very quickly.
Source: The Epoch Times, "Credit Card Use on the Rise," July 8, 2013