Experts worry American credit card debt is approaching dangerous levels

Household credit card debt is nearing the level that it reached before the recession, which may represent an unmanageable level of debt for many people.

In the wake of the Great Recession, many people in Cincinnati focused on reducing their credit card spending and associated debt. However, according to CNBC, credit card debt has been building back up during every year since 2009. Now, household credit card debt is approaching the level that it reached before the recession. Experts worry that this amount of debt may again prove unmanageable for many consumers.

Alarming debt trends

An analysis from CardHub reveals that Americans accumulated $57.1 billion in credit card debt in 2014. Over $45 billion of that debt was accrued during the last quarter of the year. The overall amount of new debt marked a 47 percent increase over the amount that was built up in 2013.

According to Bloomberg, a growing number of consumers are using their credit cards, rather than home equity loans, to make large purchases. In 2015, credit card balances are expected to surpass home equity loan balances by the largest margin in 25 years. Problematically, the average credit card interest rate is three times higher than the average rate for a $30,000 home equity loan. As a result, this reliance on credit card borrowing could leave consumers facing greater overall liability.

Credit card debt is expected to continue increasing in 2015. According to The New York Post, CardHub anticipates a $60 billion increase in debt, which would represent a 5 percent increase over the large amount of debt that was accrued last year.

A potential tipping point

Financial experts express concern about what will happen if credit card debt again reaches pre-recession levels. In 2008, the average household held $8,300 of credit card debt. During the following several months, credit card delinquency rates rose rapidly, reaching 6.7 percent during the second quarter of 2009.

CNBC states that at the end of 2014, average household credit card debt reached $7,200. This number still falls well below the $8,300 that experts consider unsustainable. Still, consumers have recently shown more willingness to use their credit cards, and overall credit card debt is expected to increase. Consequently, many people may soon accumulate debt that they are not able to handle.

Seeking debt relief

For people who are burdened with overwhelming credit card debt, one potential means of relief is filing bankruptcy. Filing bankruptcy can put a stop to creditor harassment and other unwanted forms of contact. It can also give people who are struggling an opportunity to consolidate debt or liquidate assets to pay down as much debt as possible.

As an unsecured debt, credit card debt may be eligible for repayment or discharge through Chapter 7 bankruptcy. For people with higher incomes or substantial assets, however, Chapter 13 bankruptcy may be a more appropriate choice. Discussing the terms of both chapters with a bankruptcy attorney is an advisable starting point for anyone who is considering seeking relief from credit card debt through bankruptcy.

Keywords: credit card, debt, bankruptcy, Chapter 7, Chapter 13