Five Consumer Credit Trends to Watch in 2013

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Morgan Drexen speaks to attorneys about challenges facing consumers; Is there a student loan bubble about to emerge?

Morgan Drexen reports on what is being seen from attorneys who handle those in debt - including a student loan bubble in 2013

Five Financial Trends Attorneys Are Seeing in 2013

As the economy has struggled, the type of person that has come in has become more affluent. I’m seeing clients that are making $130,000 or $140,000 a year.

Americans are now carrying nearly $3 trillion of consumer debt, a record high. But there’s mixed news in that number. Credit card debt has actually dropped in recent years, all while student loans and auto loan debt have soared. Morgan Drexen ( spoke with several attorneys who specialize in consumer credit issues, including bankruptcies and debt settlement. Here are the top five consumer credit trends they see heading into 2013.

1. Creditors Suing for Small Amounts

Credit card companies are not afraid to sue their customers over outstanding balances, especially when those customers are not represented by an attorney. What’s changed, according to California attorney Timothy Reed, is the amounts creditors are now suing for.

“I’ve seen a lot more lawsuits for a lot smaller numbers,” says Reed. “I’ve seen lawsuits for less than $2,000. That’s extremely surprising to me. Ordinarily that wouldn’t even be a small claims suit.”

2. Debt Collectors Getting More Aggressive

Credit card companies like to outsource their dirty work. Enter the debt collectors. Oregon Attorney Erik Graeff says debt collectors have sharpened their game and are getting more aggressive.
“They seem to have a better feel for who they can bully,” says Graeff. “Somebody who’s unrepresented; somebody who is a little less sure with regards to their rights and their debts. Collections and creditors have really developed their techniques in these last four years of really hard times. They’ve really developed even nastier techniques than they used before.”

3. More Bankruptcy Filings

In 2005, Congress passed a series of rules aimed at making it harder for consumers to file for chapter 7 bankruptcy. The law’s passage led to a record number of bankruptcy filings as consumers scrambled to beat the law’s enactment. Because Americans are allowed to file for bankruptcy every 8 years, Graeff expects filings to tick up in 2013.
“In ‘05 there were major changes made to the bankruptcy act that made it a lot harder to file for bankruptcy. So what we’re seeing is it’s 8 years later, and all those people who went into a rush to file before those harsh ‘05 amendments got put into the law are coming back. Lots of them will have to file again.”

4. Bankruptcy, Debt Resolution Not Just For the Poor

Another eye-opening trend is the changing demographic makeup of those seeking bankruptcy and debt resolution services.
“As the economy has struggled, the type of person that has come in has become more affluent,” says Indiana Attorney Neil Waechter. “In the initial stages of the recession, it was young people, people that didn’t have a lot of resources. Now I’m seeing clients that are making $130,000 or $140,000 a year.”

5. The Next Bubble: Student Debt

As the crisis surrounding credit card debt has begun to subside, a new bubble has emerged: student loan debt. According to estimates, there is roughly $1 trillion in total outstanding student loan debt in the United States today. The average college student is graduating with approximately $25,000 of student loans.
“I think that the student loan bubble is really a big issue right now,” says Waechter. “What they have done is cause people to start taking out credit cards and personal loans and extending themselves further and further financially just trying to meet their debt service to the student loans.”

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