INDIANAPOLIS — Getting out of debt is becoming harder for Hoosiers, according to a local bankruptcy attorney, who says credit card debt is at an all-time high.
It's also leading to more bankruptcy filings.
"It's been a real challenge," said Julian Smith.
Smith lives in his car and is trying to get back on his feet after filing bankruptcy last month.
"It can seem hopeless at times, but once you're on the other side of it, things should look a bit better," he said.
His debt piled up due to a failed rental business based in Carmel. He started it after losing his job during the pandemic.
"I got laid off twice during that then the whole paradigm of how restaurants work shifted, it was hard for the restaurant business," Smith said.
Indianapolis bankruptcy attorney Mark Zuckerberg says his office is seeing a major increase in filings.
He says many are mom and pop shops and trucking companies that tried to make it through COVID, but ran out of assistance funds.
"As the business fails, the people that they signed the guarantees with are now coming after them individually. It's a double whammy. Not only did they lose their business, but now they have to file bankruptcy themselves," he said.
Hoosiers are also struggling with credit card debt.
"Credit cards are at an all time high," said Zuckerberg.
Nationally, credit card debit passed $1 trillion. That's on top of student loan repayment, mortgages and inflation.
"People were on deferments during COVID," said Zuckerberg.
According to the U.S. Bankruptcy Court for the Southern District of Indiana, personal bankruptcy filings are up nearly 20% compared to this time last year. Business filings are up as much as 40%.
"Bankruptcies are there to help people," said Zuckerberg.
Zuckerberg says what is typically a last ditch effort for many can help.
"It may take literally 30 or 40 years to pay off the debt, and they're not saving any money. In the meantime, if you use bankruptcy, you can get rid of the debt and start putting money back into your own savings accounts so you can actually get ahead," he said.
"It's a constructive tool to get your finances back in order and hopefully rebuild your credit. So, I still recommend it. It's just a rough road," said Smith.
Zuckerberg says the two most common types of bankruptcy filings in Indiana are Chapter 7 and 13.
Chapter 7 allows people to keep their assets without paying creditors back. It stays on your credit report for ten years.
Chapter 13 is for people who can't afford to pay debts in full but have a steady source of income and agree to a repayment plan over a three to five year period.
Chapter 13 stays on your credit report for seven years.
