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Modern Americans are more comfortable with personal debt

Americans have grown increasingly comfortable carrying personal debt. From high mortgages, car loans and credit card balances, many are walking a fine line between living a comfortable life and taking a financial tumble. One misstep, one serious illness, lost job or economic downturn and the debt-to-income ratio could fall, tragically, into the red.

Although good, hard working people do what they can to cushion themselves for a financial shortfall, that backup fund may not cover the rising cost of living expenses and accumulated debts.

Unfortunately, this scenario is not uncommon to the Southern states, which were hardest hit during the recession when bankruptcy reached a high. And Tennessee continues to suffer among the highest bankruptcy filings in the nation. Perhaps much of the problem stems from the trend to carry greater debt. After all, the U.S. is approaching a $20 trillion figure as a nation.

Student loan and housing trends

According to a study conducted by the Congressional Budget Office, the debt managed by families remained static from 1989 to 2007, but increased 50 percent over the following six years. The primary culprits have been student loans and housing.

Households operating in the negative in 2007 held student loan debt of about $29,000 on average. However, by 2013 that figure escalated to 64 percent with an increased student loan debt of $41,000.

What may be related to the housing market crash, three percent of families operating in the red in 2007 had negative home equity. However, in 2013 about 19 percent of homeowners were under water by an average of $45,000.

Credit card trends

During the last 45 years, Americans have accumulated literally billions of dollars in credit card balances. According to the Federal Reserve, consumer debt reached $3.34 trillion in early 2015 with revolving debt - mainly credit cards - accounting for nearly $900 billion of it. In terms of generational debt, a person born in the early 1980s carries approximately $5,500 more in credit card balances on average than their parents born in the early 1950s. The 1980s boomers also incur, on average, more than $8,000 than their 1920s born grandparents.

Debt to income ratio

According to Forbes, the average American household had a cumulative average debt of more than $200,000, which includes mortgage, car loans, and credit cards among others. However, the average house income for 2015 was just over $55,000, which is a staggering amount of debt.

Bankruptcy may feel like an unwelcome concept, but with the rising trend in personal debt many are walking the razor's edge. An unforeseen financial problem could place you in unfortunate financial straits.

You can use bankruptcy, specifically Chapter 13, as a proactive tool when you earn a good income but find that your debt ratio is too cumbersome to handle.

Under Chapter 13, consumers can reorganize their debt into a manageable repayment plan that lasts three to five years. Additionally, the process allows them to do so without paying exorbitant interest rates, work with lenders to modify loans and catch up on arrears.

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