Information obtained by the Federal Reserve in its annual study to determine the health of the household finances of people in California and other states indicates that almost half of respondents live on a financial edge. It is reported that 76 million people are struggling to get by and will not be able to handle even $400 emergencies without obtaining high-interest loans or using their credit cards. Unfortunately, such measures often lead to unmanageable debt.
The study surveyed over 5,000 people last October and November. About 20 percent of respondents said they had gone through financial hardships during the past 12 months. Many also mentioned that someone they knew had struggled financially. The reason most frequently quoted for the hardship was employment loss or reduced work hours.
Consumers who are barely managing to live from pay check to pay check may see no other solution than to use the money they put away for emergencies. Once those accounts are depleted, they may even start dipping into retirement funds. Desperate measures are often taken when emergencies arise without the availability of a financial cushion. When these involve payday loans and credit cards, it may start a never-ending spiral of debt that can become overwhelming in no time.
Fortunately, consumers can seek protection via personal bankruptcy. Bankruptcy laws allow those with unmanageable debt to get back on their feet. Although it is possible for a consumer to file for bankruptcy on his or her own, there are important decisions to be made along the way and being fully informed may be beneficial. For this reason, some consumers in California choose to retain the services of an experienced bankruptcy attorney to support and guide them throughout the proceedings.
Source: CBS News, "Half of Americans are living on the financial edge", Aimee Picchi, May 27, 2016