How Much Debt Do Californians Owe?
Oct 01, 2019
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California is one of the best states to start a business. With exposure to natural resources along with high-tech industries, it is a place unlike any other. However, like most regions in the world, government policies are a threat to their future. California has the highest debt to income ratio in the US. According to the data of the New York Federal Reserve bank, Californians have a per resident debit balance of $65,740. Furthermore, Californians owe about $52,000 on their mortgages per capita.California’s economic policy is very volatile, but in recent years, residents have taken it upon themselves to make the debt situation more stable. In the last five years, mortgage debt has dropped 17%, and credit card debt has been reduced by 20%. This is a great achievement, but there is still a long way to go if the debt situation is to be averted.
Let’s look at the most common factors that are contributing to the debt increase in California.
Unemployment
The state’s unemployment rate, which was at an alarming 12.2 percent in late 2010, has recently dropped to 4.4%. With more and more people returning to work, the housing market stabilizing and more job opportunities, the rate is expected to drop even more in the future. This is a very bright sign that things are going to change, but right now Californians are still trying to repair personal finances following the Great Recession.
Credit Card Debt
Like most Americans, Californians rely heavily on credit cards which is causing a substantial amount of credit card debt. According to TransUnion, a Californian, on average, is in a deficit of $5,143.
Bankruptcy
Most cases of bankruptcy are not due to reckless spending, but financial hardships. During the Great Recession, a lot of people who couldn’t afford major expenses filed for bankruptcy. In 2011, more than 240,000 people filed for bankruptcy in California. This accounted for 17% of all bankruptcies worldwide. Most of these people are still suffering from the consequences of it. If you are one of those trying to find a way out, you can get help from National Debt Relief.
Mortgage Debt
According to Experian, Californians have the second-highest mortgage debt in the country with an average debt of $363,537. However, Californians can now breathe a sigh of relief, as in 2016, the average price of an existing single-family house went up to $30,000 to $526,580. This gives them an opportunity to make mortgage payments on time, improve their credit score and recover lost money.
Student Loan Debt
College costs have seen a very drastic rise because of inflation, and every class graduates with more debt than the last one. In 2015 and 2016, California college graduates racked up to $10 billion in federal student loan debt. However, this is still a lot less when compared to the rest of the country. California’s government is looking to pass a student borrower bill of rights, which aims to protect borrowers with student loans.
California’s Laws on Consumer Debt
The state of California has issued a limitation of four years for all debts except those made with oral contracts where the limitation is two years. This means that lenders can’t attempt to collect a debt that is more than four years past due. Also, with the federal Fair Debt Collection Practice, federal debt collectors are prohibited from harassing or misleading a debtor.
Moreover, you can refuse to pay your credit card bill if there is a billing error. You have a 60 day period to notify your card issuer so that the problem can be resolved. You can also refuse to pay if there are claims and defenses regarding your credit card bill.
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