Many individuals are very hesitant to file for bankruptcy but with the amount of debt the average consumer is facing these days, the economy of the world is not what it once was. Individuals in the United States seem to have the most debt because it is so easy to buy most anything you want on credit.

Most of the debt individuals have accumulated is due to their vehicle and their home. This type of debt is referred to as secured debt because there is a physical item attached to the loan. Should the loan not be repaid according to the terms the lender can take possession of that property.

Credit cards fall under the category of unsecured debt because they have no collateral attached to them. This is the second highest type of consumer debt there is right now. The fact that credit cards are so easy to obtain and use is one of the major reasons why so many people are facing financial struggles. Ironically, credit cards were designed to help consumers be able to have a way to cover expenses during an emergency situation.

Yet it is the process of using credit cards that has been put into motion by the credit card companies that keeps consumers in the continuous cycle of debt. In fact, many consumers find themselves a slave to their credit card debt and that is when they look to solve the problem by filing for bankruptcy. How do credit card companies do this? The fact that they allow consumers to make a very small minimum payment on their account each month results in the balance taking years to pay off.

Each time an individual falls for a low monthly payment on their credit cards they are one step closer to financial disaster. The amount they owe doesn't go down much with the payment and if more charges are made the balance actually increases. When an unexpected circumstance happens such as losing a job or illness the credit card may get used even more. Yet the individual is slowly losing their ability to make even those low minimum payments. The accumulation of secured and unsecured debt that an individual has may result in the decision to file for personal bankruptcy.

Author: Caleb Liu

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If you found this information on Personal Bankruptcy useful, you'll also want to read about Bankruptcy Code.

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