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Credit card debt often arises out of necessity, report finds

Although many people believe that those struggling with credit card debt are chronic over-spenders, a report found that many people incur this type of debt because of unemployment or medical expenses.

When you think of other people struggling with credit card debt, you may harbor some resentment towards them, because you assume that their inability to spend within their means is the reason for their predicament. Although you would not be alone in your assumption, according to a report released earlier this year from Demos, a think tank, a significant number of people struggle with credit card debt out of necessity, not because they cannot resist the latest in consumer goods.

Although the effects of the Great Recession have waned, many people are still unemployed. According to the report, just being unemployed for two months or longer makes a person 14 percent more likely to have credit card debt than those still working. In addition, layoffs and job losses cause a quarter of low and middle income families to take on credit card debt.

Although unemployment is a major cause of credit card debt, it pales in comparison to medical expenses. According to the report, 60 percent of households that have credit card debt blame the problem on out-of-pocket medical expenses, regardless of whether they had health insurance. Since this type of expense can be unexpected and very costly when it is incurred, many families find that they must finance it with credit cards in order to get the treatment they need. According to the report, the average medical debt for these families is $1,555.

Escaping credit card debt

Those struggling with credit card debt can quickly find themselves in a hopeless situation, due to the interest and fees that credit card issuers charge. As their initial debt can quickly increase if not paid off in full soon, many in this situation have little hope of repaying their debt. For those in this situation, bankruptcy may be the best way of managing their crushing debt.

In Chapter 7 bankruptcy, credit card debt, along with other unsecured debt such as medical bills, is discharged within a few months of filing it. This allows the filer to restart their financial lives fairly quickly.

For those struggling with a mortgage as well, filing Chapter 13 bankruptcy can be a better option. Chapter 13 allows filers to become current on their mortgages by making affordable installment payments over three to five years. In most cases, credit card debt does not have to be repaid during Chapter 13, allowing filers to start over free of this debt.

If you are suffering from crushing credit card debt, it is important to learn about your options. An experienced bankruptcy attorney can recommend the best means of getting back on your feet.