The Credit Card Debt Situation
Since 2020, debt has risen significantly. Millennials experience a 30% average debt increase, and the current total debt is roughly $3.8 trillion. Ironically, people were saving significant sums of money before the debt spiral began. Now, many people find themselves struggling financially.
While profligate spending could lead to an increase in debt, other factors play a role. When inflation raises the price of everyday necessities and people's incomes decrease, they often borrow heavily. In time, the debt amassed could lead to insolvency.
There can be workable strategies to address significant obligations. Some might explore debt relief strategies that keep them from filing for bankruptcy. However, there could be situations where paying off the debt proves impossible, and bankruptcy becomes the only option.
A debtor's specific financial situation may determine how they approach bankruptcy. Chapter 13 is a wage earner's option, as this category of bankruptcy involves completing a payment plan on a portion of the debt. Unsecured debt, such as credit card debt, could end up being discharged. Anyone who files Chapter 13 and fails to pay their monthly plan obligations may find their bankruptcy dismissed, and collection action would likely resume.
Those who pass the means test for Chapter 7 would engage in liquidation bankruptcy. After the liquidation of non-exempt assets to pay off some debt, other debts may face discharge. Debtors have no obligation to pay a discharged debt.