As the national economy continues to falter, many families and individuals have understandably fallen on hard times. In July 2010, the official unemployment rate had topped 9 percent nationally, a number which is actually underreported due to discouraged job seekers who eventually fall off the unemployment ranks. More than 12 percent of the population may actually lack employment. Millions more have taken significant pay cuts. The situation has forced families to cut spending.
Before this period of hardship began, the country was experiencing an unprecedented buildup of household debt. This was due in part to high levels of confidence in future economic conditions by the public and to an easy-money situation spurring lower lending standards. High levels of credit card debt became the norm, and the lenders continued to encourage people to spend more and more money.
So what happens to those who incurred household debt over the last decade yet can no longer afford to manage the outstanding balances because of job loss or pay cuts? Many of them end up in bankruptcy court due to their inability to service their debts. Individuals should reserve bankruptcy as a last-resort option, as it will severely damage credit reports. It will take the average person years to undo this damage.
For anybody in these dire financial situations, debt consolidation is often the most prudent and effective alternative to bankruptcy. Debt consolidation is a credit-friendly way to lower your total monthly payments to manageable levels. It can help you get creditors off you back. Debt consolidation and debt counseling can provide you with the pathway to work out past due loans and lower interest rates, leaving you with less monthly payments to deal with. If you are one of the countless Americans who have experienced job loss or some other financial catastrophe, you should meet with a credit counselor to talk about debt consolidation before considering bankruptcy.
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