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Household debt numbers looking better, but not for everyone

Household debt in the United States has declined since the height of the bubble that preceded the Great Recession. The total debt owed by American households now stands at about $11.4 trillion, which is still a very big number. By far the biggest component of this debt is mortgage debt, including debt from home-equity loans, which totals $8.7 trillion. Credit card debt, in comparison, totals significantly less: $672 billion. The total credit card debt is less than that for automobile loans, which total $750 billion, and student loans, which total $914 billion.

The debt-to-income ratio, which compares total debt to disposable (after tax) income, was very high during the bubble. It has come down, but it is still much higher than it was a decade ago.

But when household income is compared to actual payments that are made on the debt, the picture looks much better. The percentage of Americans' monthly income which is used for payments on debt is actually below what it was 10 years ago. The primary reason for this is the current low interest rates that are available. Because of these low rates and the resulting lower monthly payments, debt is putting less of a strain on the average American household than it did 10 years ago.

Unfortunately averages do not tell the whole story. There are still far too many people in this country who are struggling with insurmountable consumer debt. For these individuals, filing for bankruptcy may be the best option to get relief from creditors and a fresh start financially.

Source: Alabama Public Radio, "Household Debt in America, in 3 Graphs," Nov. 26, 2012

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