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Credit card debt is growing rapidly

While Virginia residents may be enjoying the benefits of a strong economy, that strength could be partially because of increased credit card spending. According to the New York Federal Reserve, household debt was $13.15 trillion in the final quarter of last year. Most of that debt is made up of mortgages, but credit card debt also rose significantly from the third quarter of 2017 to the fourth quarter of 2017.

Although the $26 billion increase in credit card debt in that time period isn't necessarily bad, delinquency rates are also going up. The delinquency rate was at 2.48 percent in the last quarter of 2017 compared to 2.12 percent in the beginning of 2015. Unpaid credit card bills can be a problem for both an individual and the American economy as a whole. On an individual level, late or missed payments can be reported to credit agencies.

Missed payments stay on a credit report for seven years, and it could take two full timely payments to restore one late payment. Once an account goes to collections, it can be even harder to fix the damage done. In some cases, a single missed payment could drop a credit score by up to 110 points. As credit scores drop, borrowers may be subject to higher interest rates from lenders.

Filing for bankruptcy may help a person obtain relief from overwhelming debt. In some cases, the debts can be discharged in a matter of weeks without paying anything to creditors. Those who are not eligible for Chapter 7 bankruptcy can have debt reorganized under Chapter 13 of the bankruptcy code. This may allow a debtor to keep assets and stop creditor harassment while making payments over a period of three or five years.

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