Everyone wants to live the American dream. Unfortunately, that dream—however you interpret it—generally requires a steady and substantial income. Even more unfortunate is the fact that 90 percent of Americans fall short of having this dream fund.
Some people don’t let their income limit their ambition to live a luxurious lifestyle. This attitude leads to overstretched credit card limits, short-term loans, and impulse shopping with money that was set aside to pay bills. But this sort of budgeting cannot work for long. It creates an ever-growing pit of debt from which many families cannot climb.
Does this sound familiar?
How many credit cards do you have? Can you count the number of debts you owe on one hand? Don’t feel bad, most people can’t. However, besides the annoying creditor calls and the stress of rebalancing your budget every week, do you know what other consequences you may face if you fail to get out of debt?
You may want to learn before the potential risks become stifling realities.
The Risks of Carrying Too Much Debt
Is America overwhelmed by debt? It sure can look that way. American consumers are in debt to the tune of $11.85 trillion. Recent drops in indebtedness are due more to defaults and to banks writing off debts as uncollectible. The trio of consumer debt (mostly credit card debt), mortgage debt, and student loan debts has become overwhelming for many families. Unfortunately, just as there are many ways to dig yourself into debt, there are also many dire consequences of failing to climb out. These include:
- Bankruptcy penalties. If you’re unable to pay your debts and choose to declare bankruptcy, although many of your debts will be organized, dropped, or settled, your credit report will be sullied. Bankruptcies can remain on credit reports for up to 10 years. However, with prudent guidance from an experienced bankruptcy attorney, the consequences of bankruptcy can be managed to your advantage. You may even end up with a better credit score after your debts are resolved!
- Foreclosure. If you’re unable to pay your mortgage, the bank that financed your house can foreclose on your loan and seize ownership of your real estate.
- Repossession. Like a foreclosure, if you’re unable to make your payments, the bank can repossess your car, boat, or other item of personal property.
- Lawsuits. Credit card companies and bill collectors can sue you in order to force payment—and a judgment against you may result in garnishment of your wages until the debt is paid.
- Tax liens. If you’re unable to pay your taxes, the IRS can put a lien, or claim, on your property to ensure that it has financial rights over other creditors.
- Garnished wages. The IRS has the right to demand your employer withhold a percentage of your wages in order to pay off taxes.
- Bank levies. Do you have a savings or checking account? The IRS can require your bank or credit union to put a hold on your funds and then seize them to pay off your debt.
- Imprisonment. Depending on the circumstances, the IRS can have you arrested and placed in jail for tax fraud or substantial tax debt.
Is The Cost of Debt Too High?
Given the fact that debt can quickly spiral out of control, as well as the potential risks that debt can create, would you want someone to help you find relief before things got out of control? Do you think these penalties are fair and justified for debts?
Let us know your thoughts by leaving your opinion in the comment section provided on this page. We look forward to reading how you feel about debt risks and relief. We also are eager to learn more about your personal financial struggles and what we can do to help.