How debt affects Americans after Fed rate hike

Florida residents who have less than $132,500 in household debt including mortgages have a debt burden below the national average according to a report by NerdWallet. Paying off existing debts may become harder thanks to an interest rate hike by the Federal Reserve. This was just the second such increase since rates were cut to essentially zero in 2008.

A rate increase may have a significant impact on those with medical debt. Medical expenses have increased by 57 percent since 2003 while median incomes have only increased by 28 percent. An increase in interest rates means that borrowing costs increase for those individuals as well as anyone else who has accrued debt to pay off their bills. Total household credit card debt in the United States was at $747 billion at the end of the third quarter of 2016.

While it is lower than the total credit card debt during the Great Recession, that number is expected to rise to $842 billion by 2019 according to the Federal Reserve Bank of New York. Personal loan debt has also grown thanks to online platforms such as Lending Club and Prosper. The average interest rate for a personal loan of $10,000 is 6 to 10 percent for people with high credit scores.

Those who are looking for debt relief may wish to consider filing for Chapter 13 bankruptcy. Doing so may allow an individual to consolidate personal loan or credit card debts and pay them off over a period of three or five years. It may also be possible to buy time to renegotiate the terms of a secured home or auto loan. Bankruptcy lawyers may further explain the benefits of filing such as an automatic stay of creditor collection actions.