Higher Interest Rates May Lead to More Consumer Debt and Bankruptcy Filings
Interest rates in Florida and across the United States continue to rise, making it more difficult for consumers to access affordable loans and for debtors with unsecured debts to be able to pay off the debts they owe. According to a recent report from the Committee for a Responsible Federal Budget, the “30-year Treasury note just reached its highest yield in almost 19 years,” and “other interest rates are approaching similar highs.” Those numbers are significantly about the projections provided by the Congressional Budget Office. As the report explains, “if interest rates remain this far above projections across the yield curve, it would have large fiscal consequences.”
One of the consequences is likely to be increases in consumer debt, and, potentially, a further increase in personal bankruptcy filings. Our South Florida bankruptcy attorneys can say more.
Consequences of Interest Rates That Are “Exploding the Debt”
As the report from the Committee for a Responsible Federal Budget underscores, one of the major consequences of rising interest rates is likely to be a situation in which debt “explodes.” Indeed, over just one decade, unless interest rates stabilize, the nonpartisan and nonprofit organization estimates that debt would rise by approximately $2 trillion and would total 125 percent of the Gross Domestic Product by the year 2036. In addition, interest payments would become 30 percent of revenue, which would represent a substantial increase from the 19 percent report in 2025.
When it comes to individual debtors, household interest costs would increase significantly. Currently, those costs are approximately $7,900 on average. By 2036, they would rise to $17,000. In addition, consumer loan interest rates would rise substantially, which would “push mortgage costs up by thousands of dollars.”
Interest-Related Debt and Bankruptcy Filings
As interest rates rise, debtors in Florida who have a revolving balance on credit cards and who borrow new loans at higher rates are likely to see their total debt increase. In what may be a relatively short time, debtors who are making only the minimum monthly payment on their credit cards and remaining current on their debt could see credit card payment minimums rise significantly, making it difficult or even impossible to keep up with their debt.
As a result of their “exploding” debt, as the Committee for a Responsible Federal Budget describes the situation that is likely to occur unless interest rates stabilize, more debtors are likely to be considering bankruptcy filings. Individual debtors in South Florida may be eligible for a liquidation bankruptcy under Chapter 7, or a reorganization bankruptcy under Chapter 13.
Contact a West Palm Beach Bankruptcy Attorney Today for Assistance with Your Personal Bankruptcy Filing in Florida
For many of the debtors in Florida who are going into more and more debt due to rising interest rates, a bankruptcy filing may be on the horizon. A Chapter 7 bankruptcy can allow most debtors to discharge credit card debt and other forms of debt, though it will require a liquidation of non-exempt assets. You might also want to consider a Chapter 13 filing, which does not involve the liquidation of any assets and can still allow for a discharge of credit card debt at the end of the case. Contact one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC today to discuss your options.
Source:
crfb.org/blogs/rising-interest-rates-are-exploding-debt
