In what might be deemed an ominous trend, Americans seem to be taking on additional debt (most likely as credit card debt) to pay for the expenses of daily living. This approach to money management, while not ideal, can be appropriate in the short term or in individualized situations of growing income, but when the trend is nationwide and a booming economy is nowhere near the horizon, this local bankruptcy lawyer is troubled. The situation is even scarier where consumers dip into retirement accounts just to survive. The reason for this angst is that bankruptcy presents a real, viable alternative to those struggling with debt.
After a period of frugal spending, the amount that Americans are putting into savings has lowered to smallest percentage since the beginning of the recession that began in December 2007. The savings rate dipped to 3.5 percent in November 2011, down from 5.1 percent in the year before (these figures courtesy of the US Department of Commerce). Presumably, the money not being saved is money being spent. And once that money gets spent over a long enough period of time, putting the cap back on the bottle is quite difficult. This invariably leads to growing credit card bills where even the minimums become difficult to pay.
There were some indications of growth in the US economy when it officially emerged from the recession in the middle of 2009. Hiring was up and consumer confidence rose. Nonetheless, annual growth in the economy is anticipated to be approximately two percent, only a slight increase from 2011 (estimated at about 1.8%; final figures not yet available).
Americans (and the rest of the world) see the austerity measures in place in Greece and the general debt crisis in Europe and it is worrying. The economy is too global to not be affected, even if things are beginning to tick up here at home. The other elephants in the room are the decline in housing prices (once a means of readily available cash via the refinance of equity) and the continued unemployment rate of about 9% nationally. As a result, retail sales rose to their weakest pace in seven months (in December); and sales in 2012 are expected to grow at a rate slower than that of 2011 (despite general GDP growth).
Whereas consumers used to tap into their home equity for cash, there are growing signs that 401(k) and other retirement accounts are begin siphoned. Almost one-third of 401(k) plan participants currently have an outstanding loan (this information provided by Aon Hewitt, the consulting firm, and reported by Reuters). Similarly, the Employee Benefit Research Institute's (EBRI) annual confidence survey of retirement fell to a new low last year with 27% of workers indicating almost no confidence at all that they will have enough to retire comfortably; and nearly 15 percent of workers expect to remain in need of employment until at least age 70, a figure up from 11% just five years prior. EBRI also reports that more than one-fifth of those 50 or older altered their medical prescriptions to save money and nearly the same amount had foregone doctor's appointments altogether to save money.
As a Montgomery County Bankruptcy Attorney, it is troubling to see folks dip into savings to tread water. It is equally troubling to see people, in the 21st century in the richest nation in the history of mankind, having to compromise on medical care just to avoid a co-pay or the costs of prescriptions. Bankruptcy can truly offer a debt relief solution that cannot be overlooked. Not only can credit card debt and medical bills be extinguished, but assets can be protected.
Few things are more distressing to find a consumer file Chapter 7 bankruptcy only after having exhausted their retirement account. The truth is: retirement accounts can be saved, no matter how much is in them, when filing a Chapter 7 or Chapter 13. Again, no matter how much you have in savings (if held in a 401(k) or similar tax-deferred retirement account), you can keep it, ALL OF IT, if you file a bankruptcy. This is because the exemptions for retirements is quite liberal.
If a 401(k) loan can a short term solution, then a loan is superior to filing the bankruptcy, most likely. But when it becomes depleted and a bankruptcy is filed in the end anyway, that debtor is left wondering why they did not contact a Montgomery County bankruptcy lawyer earlier.
With all this debt that appears to be spiking nationally, there might be an associated spike in bankruptcy filings on the horizon...along with another recession, perhaps. Debt was the cause of the Great Depression in 1929 and the housing bubble was a big component of the current troubles still lingering from 2007. If you find yourself troubled by debt or just wanting to talk about what you might be able to keep if you file bankruptcy, contact a local bankruptcy lawyer today.
