Credit Debt, Declining Bankruptcies During Coronavirus Pandemic | New
Despite the unemployment crisis caused by the COVID-19 pandemic, consumer credit debts and bankruptcies have indeed declined since the start of 2020.
According to a Federal Reserve Consumer Credit ReportNationally, credit debt fell to less than $ 1 trillion in May for the first time since 2011. Revolving credit, like credit cards, fell 28% in May. This follows a record 65% drop in April.
Debt.org reports that personal bankruptcies fell about 25% nationwide in the second quarter of 2020.
Norman bankruptcy attorney Mike Patterson said the downturn is happening because people are trying to maintain the status quo and people just can’t spend money that easily right now outside of basic needs like food.
“Okies are notorious for eating out, and we have more fast food outlets than almost any place in the country,” Patterson said. “I know that is certainly the case in Norman.”
In recent months, however, consumers have spent more money to eat at home. Five of the top six indexes of food groups in grocery stores rose in June, according to a Press release from the Bureau of Labor Statistics. The beef index has increased by more than 20% in the past three months.
Todd Christensen, Certified Financial Advisor for Money adjustment nonprofit credit counseling said it was not surprised that credit card spending was down. He said that every time a recession hits, consumers realize they don’t need to spend money on certain things.
Christensen predicts that bankruptcies will increase later in the year as government assistance programs decline, including government-backed mortgage lenders who have policies in place that give homeowners leeway substantial.
“As these programs expire, I think that’s when we’ll start to see consumers who have been made redundant and facing unemployment begin to face their debt,” Christensen said.
Christinsen said that while it may seem counterintuitive, he recommends focusing on building savings rather than paying off debt in times of financial uncertainty. He said it’s important to keep making minimum payments, however.
“If things continue as they are or get worse and a layoff is in the future, the credit card won’t help them pay off their home loan,” Christensen said. “You can’t survive very long by paying off a loan with another credit card. You cannot play this transfer game for long periods of time without getting into serious trouble.
Christensen advises people to focus on eliminating what he calls “superfluous expenses” like gym memberships, streaming subscription services, and long-term contracts like new car loans. He said it was essential to prioritize the allocation of funds to survival needs such as shelter, security, food, water and clothing, as problems can arise when priorities are not in. order.
Due to the impact of the pandemic on unemployment, having the funds to pay for utilities could become a problem for some residents. The most important action in this case, according to Rick Knighton, Assistant City Attorney for Norman, is for residents to contact the city about the situation. He said the city can help put together a payment plan based on your particular situation.
“They will work with you to ensure that your utility is not disrupted because you are having difficulty paying due to the COVID-19 pandemic or frankly for any other reason,” Knighton said.
When basic needs such as utilities are taken into account, Christensen said the next step is basic needs, such as transportation, cellphones and the internet, which can have a major impact on lifestyle. He said standard desires, like dining out or dining out, are lifestyle choices and the last priority should be hopes and dreams which are usually bigger expenses.
“If we don’t need it, but we haven’t lost our job, we can later re-evaluate our savings and say, ‘I need it for emergencies, and it can be for a vacation or a vacation. different vehicle, “” said Christensen. .