Debt as a Symptom: Finding the Cause and Identifying a Cure

Debt is among one of the most frustrating and difficult things that consumers deal with. Often, debt is cited as the problem. But is this truly the case? Perhaps debt isn't so much a problem as it is a symptom of other money issues.

Repeat Bankruptcy Filings Up


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According to the United States Courts, 28%of those who filed for Chapter 13 bankruptcy protection in 2011 had sought protection during the previous eight years. In some districts, more than 50% of those filing for bankruptcy have already had a bankruptcy filing.

Many consumers see bankruptcy as a "clean slate" -- a way to start over again. However, in some cases consumers are far from improving their lots. Indeed, it seems as though within eight years, a significant number of bankruptcy filers are in the exact same position, looking for help with their debts.

This is an indication that the debt itself isn't the problem. Just getting rid of some (or all) of the debt owed doesn't guarantee that a better financial future is on the way. Instead, it takes other actions, and a change in behavior, in order to stay out of debt long-term.

Looking Behind the Debt


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Rather than seeing debt as the issue to be resolved, it makes sense to look at the why behind the debt. Debt is often the result of other financial difficulties, including:

Overspending: Consumers who live beyond their means and don't keep their spending under control are more likely to go into debt. The debt is the consequence of the overspending. Educational tools and the help of a counselor can help people make and stick to a budget.

Medical bills: According to The Fragile Middle Class: Americans in Debt by Elizabeth Warren (back in her Harvard Law School days), 91% of those who file bankruptcy do so after losing a job, experiencing a major medical event, or a divorce. Debt in these cases is a side effect of major financial disasters.

Saving For a Rainy Day


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In either case, two of the ways to guard against debt and bankruptcy are to prepare for financial emergencies by building an emergency fund and to keep spending within the limits of income. While savings is must-do for changing spending habits, major financial catastrophes cannot be scheduled, but they can lessen the blow.

Rather than being the problem, debt is often an indication that something else is an issue, whether that something else is a failure to live by a budget or to prepare for a rainy day. If debt is a recurring issue, rather than constantly looking to get rid of the debt, it might make sense to instead look at what has been leading up to the debt. By tackling these other problems, and focusing on improving general financial habits, the debt issue has the potential to solve itself.