Most people in Kentucky carry some type of debt from a credit card, car loan or mortgage. A closer look at FICO scores reveals a split in the consumer market. Although the average credit rating is at a record high above 700, the average emerges because some people are doing well and others are struggling. On the high end of the scale, many people have reduced borrowing, but subprime auto loans and student loans are straining the budgets of another segment of consumers.
Since the financial crisis of 2008, the pace of subprime auto lending has quickened. Some financial analysts liken the auto lending to the subprime mortgage crisis except that the loans are for smaller assets and not as likely to harm the economy significantly. Income verification of subprime loans for vehicles occurs on only about 8 percent of loans. The total nationwide debt attributed to auto loans has reached $1.2 trillion, which represents a 70 percent increase since 2010. With nonexistent underwriting on most of these car loans, experts expect consumers to start defaulting at a higher rate.
Other debts have been edging up as well. Collective credit card balances have hit $784 billion, and card issuers have reported a rise in delinquencies. Student loans also continue to mount. Outstanding balances for education loans now total $1.3 trillion.
At the individual level, stagnant wages, job loss or a medical crisis could leave a person unable to pay debts. Bankruptcy could offer a way to reorganize or discharge debts, and an attorney could provide a person with information about the process. An attorney could explain which types of debts qualify for bankruptcy protection. If a person decides to file for bankruptcy, an attorney could prepare the court papers and advocate for the debtor during conversations with the creditors.