Many Americans have more credit card debt than savings, survey says

Financial experts often recommend that you keep almost three month's pay on hand in case it is needed in an emergency. This is sound advice, but nonetheless advice that many Americans are not heeding, according to a recent survey by Bankrate.com.

For the survey, Bankrate.com asked participants what they have more of: credit card debt or emergency savings. The results were quite frightening. Only 55 percent of participants said that they have more in emergency savings than they do in credit card debt. Unfortunately, this figure has not changed much from recent years. In 2012, 54 percent said that they had more emergency savings; in 2011 it was 52 percent.

This trend is not limited to households of modest means. Even among the highest income level surveyed--$75,000 or more per year-only two out of three people had more emergency savings than credit card debt. Additionally, 60 percent of men and 49 percent of women said that they had more savings than debt.

According to Bankrate, the recent recession is not to blame. If found that the amount of savings as a percentage of disposable income declined for 20 years before the recession. Although the recession caused the savings rate to increase, it has not increased enough to reverse the two-decade trend.

Bankruptcy may help

For many people who are overburdened by credit card debt, bankruptcy may offer a solution, be relieving consumers of the obligation to pay many types of debt. In particular, bankruptcy is especially effective in eliminated unsecured debt such as credit cards and medical bills.

Individuals who seek to file bankruptcy have two choices: Chapter 7 and Chapter 13. In Chapter 7, a trustee sells off all of the debtor's nonexempt property to pay his or her debts. Although this sounds dire, the average person usually has little if any nonexempt property (such as vacation homes), so most do not lose any property during the process. Once the sale of the property (if any) is concluded, the debtor receives a discharge, meaning that he or she no longer has to repay many types of debt, such as credit card bills.

In Chapter 13 bankruptcy, on the other hand, there is no sale of property. All of the debts are restructured into an affordable payment plan, where the debtor makes monthly payments towards his or her debts over a three to five year period, paying the debts in full or only partially. As long as the debtor makes regular payments, he or she can keep all property. Once all payments have been made, the debtor receives a discharge of most of the remaining debt.

Consult an attorney

Bankruptcy can be a useful tool that can help many who are overwhelmed by debt. However, it is not always the right way to proceed. If you are considering bankruptcy, contact an experienced bankruptcy attorney. An attorney can advise you of all of your debt relief options and recommend one based on your situation.