What’s With High Income Consumers and Debt?
Everyone you ask feels like they are in worse financial shape than they were before the COVID-19 pandemic, and even worse than they were this time last year. Despite this, economists seem to be brimming with optimism. You could chalk it up to economists being a weird bunch; they enjoy thinking abstractly about money to such an extent that many of them insist that they never want to retire, even as the rest of the world goofs off at work, consuming content about being financially stable enough to leave the workforce. The economists have a point that unemployment rates are down, and wages are increasing in some employment sectors, even though prices are increasing faster. Despite this, what does it say about us as a society that the people with considerable disposable income are racking up consumer debt the fastest? When it comes to filing for bankruptcy or otherwise addressing debts that you cannot pay, it doesn’t matter. If you got into debt for all the wrong reasons, but now you want to get out of debt in the way that is right for you, contact a Miami debt lawyer.
Rising Credit Card Balances Aren’t Just for the Paycheck to Paycheck Set Anymore
Unless your income is about $200,000, it is probably not possible for you to get through a month without using your credit card. Despite this, there are differences between the indebtedness situations of consumers according to their income bracket. Low-income consumers tend to use buy now pay later (BNPL) or credit cards, if they are eligible for them, to pay for necessities such as groceries or work-related expenses such as gasoline or rideshare rides. Meanwhile, higher income consumers tend to use their credit cards, which have higher credit limits, on discretionary expenses such as travel or dining out. In other words, lifestyle creep is a factor in the rising credit card balances of people whose financial situation appears enviable on paper.
Homeownership is an important part of the equation. The lifestyle creep set has steady employment, and many of them bought houses or refinanced their mortgages about three years ago, when mortgage interest rates were low. This means that they are building equity in their homes, even as their credit card balances climb upwards.
The Bankruptcy Court Does Not Care Whether the Cause of Your Financial Hardship Is Adversity or Lifestyle Creep
The bankruptcy court is not going to reject your filing simply because you got into debt by keeping up with the Joneses. It is also possible to keep your house while discharging your debts in bankruptcy. For example, if you file for chapter 13 bankruptcy, there is no risk of the bankruptcy court liquidating your assets as long as you keep up with the payment plan. Even if you file for chapter 7 bankruptcy, the court will consider your house an exempt asset as long as it is your primary residence.
Work With a Debt Lawyer About Credit Card Debt
A South Florida debt lawyer can help you if your debt problems are getting worse even though you have a cushy job. Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.
Source:
marketplace.org/2025/01/17/consumer-debt-spending/
