Household debt rose $241 billion in the third quarter of 2013.
Analysts at the New York Fed say the 2.1 percent increase was the largest jump since 2007. The debt was primarily mortgage debt and new car loans, which is seen as a sign that consumers are gaining confidence in an improving economy. However, student-loan debt rose 5.3 percent, which was the largest single percentage increase. Some experts say that increasing student-loan debt, which just topped $1 trillion overall, is creating a drag on disposable income that is delaying the formation of new households: recent graduates are moving back home and young families are renting instead of buying.
Despite the fact that wages and job growth are both static, the borrowing trend is expected to continue.
Debt and bankruptcy
Many types of debt are dischargeable under a bankruptcy. It’s important to remember that bankruptcy may eliminate the obligation to repay the debt, but does not affect any other aspect of the agreement. A good example is past-due college tuition: bankruptcy may mean that you no longer owe the money; however, your school may continue to withhold your transcript or enforce other penalties.
Broadly speaking, there are three types of debt in a bankruptcy case:
- Unsecured debt: Credit cards, payday loans, medical bills and other such obligations are generally dischargeable immediately in a Chapter 7 and after the expiration of three or five years in a Chapter 13.
- Secured debt: Secured debts are a home mortgage, car note and so on. The underlying debt may be wiped out, but you still have an obligation to pay the note if you want to keep the secured item.
- Priority debt: Unsecured debt that is related to federal or state taxes, child support, attorneys’ fees, student loans and a few other categories. Priority debts get repaid in full before other unsecured debts get paid at all, which is a good thing because many priority debts are also non-dischargeable.
For a free consultation with attorneys who understand how the process works in Central Florida, contact our office.