Consumer debt is debt that is owed by consumers, rather than businesses or organizations. In other words, it is personal debt that is owed by regular people. It is sometimes also called consumer credit.
The debt arises when consumers borrow money, often in the form of fixed-payment loans, or when they make charges to personal credit cards. Payday loans are another example of consumer debt.
Much consumer debt occurs when consumers purchase goods that don’t appreciate in value over time. Clothing, for example, does not typically increase in value. Auto loans also account for a large portion of the consumer debt in the United States.
There is a difference between goods that don’t appreciate in value and those that are considered investments. For instance, a student loan does not always qualify as consumer debt, because it is considered an investment in increasing income in the future.
What are Some Legal Issues Related to Consumer Debt?
When consumer debt starts to get out of control, a number of legal issues can arise. Here are some common examples:
- Breach of Contract: when you sign up for a credit card, or take out a loan for a car or home, you sign a contract. If you are unable to make the payments agreed upon in the contract, you may default on your obligation to the lender, and, in doing so, create a breach of contract.
- Property Liens: In some cases, a credit organization or other lending institution can take hold of the debtor’s personal or real property through a lien. The lien allows the lender to take title of the property in lieu of missed debt payments.
- Bankruptcy: In some cases, consumer debt and overspending is the main or sole cause of personal bankruptcy. For instance, the consumer’s debt may not leave enough room for additional expenses such as emergency medical treatments.
- Filing for bankruptcy can help cancel certain types of debts. In other cases, other types of debt, such as medical debt can cause the need to file for bankruptcy.
What If I Have a Consumer Debt Dispute?
Here are some tips if you have a consumer debt dispute or are considering a lawsuit regarding the debt:
- Notify the lender if you can’t pay. It’s often the case that the bank or lender has at much at stake in your loan as you do. They may be willing to work out an alternative payment plan to keep you enrolled with them.
- Start gathering important documents like any lending contracts, debt agreements, pay stubs, etc. These may be used as evidence in a lawsuit if one arises
- Obtain advice: you may wish to consult with a professional for advice on what to do. For instance, a credit counselor or a lawyer can help inform you of your rights and obligations as a consumer
Finally, you should consider the fact that every state might have different debt and consumer laws. Keep this in mind if you’ve moved from one area to another and are unfamiliar with the laws in your state.
For instance, the filing deadlines for debt claims can be very different in each region. You may wish to consult with a lawyer for advice on these kinds of matters.
Do I Need a Lawyer to Help Me with My Consumer Debt Issues?
If you have questions regarding issues you are having with consumer debt, or, particularly, if you are facing serious issues such as potential breaches of contract or defaulting on loans, you may want to contact a local finance attorney for assistance.