Earlier this week our Miami bankruptcy law blog discussed the average amount a consumer carries in credit card debt. Although Americans are carrying about four percent less in credit card debt compared to last year, many are still struggling with high credit card balances. Recently published statistics also revealed that four Florida cities rank in the top 25 cities with the highest amount of consumer credit card debt.
Florida households have taken on credit card debt as a way to keep up with other bills and payments during the recession, but millions of younger Americans are racking up credit card debt without understanding the financial consequences of doing so. According to figures from the Federal Reserve, about half of the households in the U.S. headed by someone under the age of 35 have credit card debt.
“My peers all had a lot of credit card debt, and we never seemed to worry about money,” said a 27-year-old woman who graduated college with only $3,500 in student loans but more than $20,000 in credit card balances. The woman commented that she used her credit cards to maintain her lifestyle while she was a student. However, after earning her degree in 2006 she realized she wasn’t making as much at her first job as she thought she would make. “I felt I was drowning in credit card debt,” she said.
Many believe that a lack of financial education in teens and young adults have resulted in millions of younger Americans finding themselves in similar situations as the 2006 college grad. The fact that many young adults have witnessed their own parents going through foreclosure or using credit cards to keep up with payments doesn’t help the situation.
“Most young adults see a credit card being used every day by their parents, yet rarely do those teenagers see the credit being paid off,” commented a financial author and public accountant. These teens are not taught about financial responsibilities and the reality of paying bills, and instead they witness instant gratification and the ease of using a credit card.
As more young adults rack up credit card debt, Florida may see an increase in the number of younger residents filing for bankruptcy protection. Although filing Chapter 7 bankruptcy protection may force individuals to realize their financial mistakes, bankruptcy also gives individuals the opportunity to start over. It may take some time for individuals to repair their credit after filing for bankruptcy protection, but bankruptcy can help consumers consolidate unmanageable debt and work out a plan to reorganize and payoff their debt sooner.
Source
Azcentral.com: “Lack of financial savvy hinders youths in debt,” Russ Wiles, 25 Apr. 2011