Less Need for Debt Relief Companies Shown in Census Data

The U.S. Census Bureau released data recently which should be of concern for debt relief companies, except possibly bankruptcy attorneys.

While the amount of debt is rising for consumers the makeup of that debt is changing significantly. Most importantly, the most damning statistic from the survey is the percent of household holding debt. That number has been steadily declining meaning there are less households that need the services of a debt relief company.

According to the data, in 2000 51.4 percent of households held credit card debt but by 2011 that had dropped to 38.3 percent. More troubling was the increase in other types of debt that is not normally addressed by traditional debt relief companies such as student loans. Debt from educational loans and medical bills not covered by insurance, rose from 11 percent to 19 percent.

And the median credit card debt carried in 2011 was $3,500.

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While the number of households carrying debt has declined, at the same time, median household debt of those that carry debt has increased over the past decade: from $50,971 in 2000 to $70,000 in 2011.

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This would indicate the amount of debt is increasing in a declining consumer pool needing debt help.

Even the numbers of people holding all types of debt has been dropping as well. From a peak of about 75 percent in 2002 to about 69 percent in 2011.

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The reason there might be some indication that an increased demand for bankruptcy may exist is when you look at the household wealth trends. According to this report, overall, median household net worth decreased by $12,993, or 16 percent, between 2000 and 2011. This means that households have fewer economic resources to fall back on when they do land in trouble. A financial reset using bankruptcy may be more indicated for more people.

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A ray of sunshine does exist for those building wealth as the share of wealth held in retirement accounts increased from 18 percent to 30 percent between 2000 and 2011.

These changes are part of a long-term shift in the U.S. wealth portfolio over time: in 1984, the first year SIPP collected household wealth data, 41 percent of U.S. total wealth was held in the form of home equity, while 7 percent was held in stocks and mutual funds, and only 2 percent was held in IRA and Keogh accounts. By contrast, in 2011, stocks and mutual funds accounted for 15 percent of all wealth, IRA and Keogh accounts accounted for 15 percent, and 401K/Thrift Savings Plans, which became widely available in the early 1990s, accounted for 16 percent. The share of interest-earning assets has decreased from 14 percent in 1984 to 5 percent in 2011. – Source


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