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National credit card debt loads are on the rise once again

According to a recent report, Tennessee residents likely joined the rest of the nation in raking on increased levels of credit card debt. Consumer borrowing peaked at its highest level in a decade this past March, as consumers increased credit card debt, student loans and other debt. The Federal Reserve reported that consumer debt rose by $21.4 billion in March.

The article noted that increased consumer debt means a boost in consumer confidence, a sign of a healthier economy. Analysts say that increased borrowing is the result of rise in hiring across the nation. According to the government, about 250,000 jobs were added across the county each month from December through February, although the rate slowed in March and April. Student loans account for a large portion of this consumer debt as more Americans chose to broaden their education rather than compete in the job market.

Although consumer debt is often a sign of a healthier economy, consumers should be proceed with caution when assuming additional debt. Considering debt repayment plans when making decisions to increase expenses can be a wise move. However, in many cases, unexpected life events -- such as an illness or unemployment -- can cause additional debts to arise.

If a consumer ends up with more debt than can be managed, personal bankruptcy may be a viable solution. It may be important to note that student loan debt is not dischargeable in bankruptcy, though many other types of debt can be eliminated.

Chapter 13 bankruptcy offers a practical solution to consumers who need to reorganize their finances and establish a plan to pay down debt over a three- to five-year period. On the other hand, Chapter 7 bankruptcy occurs over a shorter period of time than Chapter 13 bankruptcy by utilizing liquidation to help pay back creditors. In liquidation, debtors sell their property and assets to alleviate their debt. Debtors in Tennessee will want to fully investigate their options to ensure the process chosen addresses their needs to set themselves on the path toward financial recovery.

Source: Bloomberg Businessweek, "U.S. consumers stepped up borrowing in March," Martin Crutsinger, May 7, 2012

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Mark T. Young & Associates
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Hixson, TN 37343

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