U.S. Household Debt Reaches an All-Time High - Borowitz & Clark

U.S. Household Debt Reaches an All-Time High

The Federal Reserve Bank of New York (NY Fed) has released its Q1 2020 report on household debt, and the total stands at an all-time high of $14.3 trillion. That’s up $155 billion from the end of 2019. Though Q1 runs through the end of March, the NY Fed notes that the numbers show little if any impact from the coronavirus crisis, due to the lag in reporting. This is the 23rd consecutive quarter of increased aggregate household debt. 

While most types of debt increased, credit card debt declined. Changes from the previous quarter were: 

  • Mortgage debt increased by $156 billion
  • Auto loans increased by $15 billion
  • Student loans increased by $27 billion
  • Home equity lines of credit (HELOCs) declined by $4 billion
  • Credit card balances declined by $34 billion

Seasonal declines in credit card debt are expected at this time of year, but the drop this quarter is larger than usual.

Household Debt in California

Among the states broken out in the report, California has the highest per capita household debt. However, that’s mostly because California has the largest aggregate mortgage debt. Other types of debt, such as student loan debt, credit card balances and auto loans, are closer to the averages in other states. 

Despite the high balances, California made a strong showing when it came to debt status. In the state: 

  • Delinquency rates are slightly lower than in any of the other states shown
  • The percentage of balances that are 90+ days delinquent is lower than in any of the other states shown, at just over 2%
  • The percentage of balances transitioning to 30+ days late is lower than in any of the other states shown
  • The percentage of balances transitioning to 90+ days late is lower than in any of the other states shown
  • The percentage of consumers with new foreclosures is lower than in any other state shown

That doesn’t mean California consumers aren’t facing financial challenges, though. With more consumer debt than any other state–well over $2 trillion–the roughly 2% of California consumer debt that is 90+ days past due adds up to a lot of money. More than $4 billion. 

One-third of the locations on this list of the most expensive places to live in the U.S. are in California. Lost Angeles comes in at number 12, with a cost of living 46.8% higher than the national average. That may help explain why the one area California didn’t come in at the low end is the percentage of consumers filing new bankruptcy cases. 

In the first three months of 2020, more than 12,000 Chapter 7 cases and about 3,500 Chapter 13 bankruptcy cases were filed in the state of California. Nearly half of Chapter 13 cases and 55% of Chapter 7 cases were filed in the U.S. Bankruptcy Court for the Central District of California, which includes Los Angeles. 

In other words, despite some strong trends in keeping balances current, the large debt burden carried by California residents can be overwhelming–especially for those whose earnings don’t keep pace with the area’s higher cost of living. The median incomes in California as a whole and in Los Angeles specifically are higher than the U.S. median, but the difference is nowhere near the 46.8% difference in the cost of living Los Angeles residents face. 

In short, if you’re facing financial difficulties in Los Angeles, you’re far from alone. Your fellow Californians are holding billions of dollars in delinquent debt, and thousands of local residents have already filed for bankruptcy protection this year. Of course, that doesn’t necessarily mean that bankruptcy is the right solution for you. The thing that sets those bankruptcy petitioners apart from many others struggling with debt, in Los Angeles and around the country, is that they acted to regain control of their finances. 

Taking the First Step Toward Financial Stability

It can be hard to know which way to turn when you’re struggling financially. The never-ending sense of urgency makes it hard to plan long-term, and that can keep you trapped in a cycle of late fees, interest, and balances that never seem to go down very much. You’ve probably heard about many different possible approaches to managing debt–debt consolidation loans, debt management plans, bankruptcy, debt settlement and more. But, the general information you find online may not be enough to help you figure out which solution might be best for you. And, educating yourself can seem as daunting as the constant collection calls and financial stress.

Scheduling a consultation with one of our experienced Los Angeles bankruptcy attorneys is a painless, completely free way to start gathering the information you need and understanding the considerations specific to your situation. No strings attached. You can schedule your free consultation right now by calling 877-439-9717 or filling out the contact form on this page. 

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