August 8th, 2024 The Financial Storm of 2024: Rising Defaults and Wage Garnishments Crushing American Consumers

From the Desk of Attorney Omar Zambrano: On Track to Helping 3,000 Families Be Debt Free in 2024

As 2024 progresses, the economic landscape is witnessing a significant rise in credit card defaults, auto loan delinquencies, and unemployment rates.

This surge has led to an increase in lawsuits and wage garnishments, severely impacting many consumers across the United States. Understanding the process and implications is crucial for those facing financial difficulties.

From Defaults to Garnishments: The Process Unveiled

When credit card payments are missed, creditors often try to recover the debt through various means, including calls and letters. If these efforts fail, creditors may file a lawsuit. If the court rules in favor of the creditor, a judgment is issued, which can include the original debt, interest, legal fees, and other costs.

With a court judgment in hand, creditors can obtain a wage garnishment order. This legal order requires the debtor’s employer to withhold a portion of the debtor’s wages to repay the debt. Federal law sets the maximum amount that can be garnished from wages at the lesser of 25% of disposable earnings or the amount by which weekly wages exceed 30 times the federal minimum wage.

Impact on Consumers: A Growing Financial Strain

For many consumers, wage garnishment exacerbates financial strain. Federal law provides some protection: for instance, if your weekly take-home pay is less than $217.50, garnishment is not permitted. However, wage garnishment can still take a significant portion of income, especially when living expenses are already high.

Unemployment Rates: An Upward Trend

Over the past four months in 2024, the weekly unemployment rates in the United States have shown an upward trend:

• July 2024: The unemployment rate was at 4.3%, which marked an increase from 4.1% in June and 4.0% in May.
• June 2024: The unemployment rate stood at 4.1%, up from 4.0% in May and 3.9% in April.
• May 2024: The unemployment rate was recorded at 4.0%, slightly higher than 3.9% in April.
• April 2024: The unemployment rate was at 3.9%, which was a slight increase from 3.8% in March.

Auto Loan Defaults: A Concerning Trend

Over the past four months in 2024, the auto loan default rates in the United States have shown a concerning trend:

• July 2024: Auto loan delinquencies continued to rise, reaching levels not seen in over a decade. The delinquency rate for auto loans in serious delinquency (90 days or more past due) was around 3.94%.
• June 2024: The default rates remained high as inflation and rising interest rates put more pressure on borrowers, leading to a steady increase in delinquency rates.
• May 2024: The upward trend in auto loan defaults persisted, driven by higher borrowing costs and economic pressures on consumers.
• April 2024: The auto loan delinquency rate was notably high, with more borrowers falling behind on their payments due to economic challenges and increased living costs.

This rise in auto loan delinquencies is attributed to several factors, including higher interest rates, increased inflation, and stagnant wage growth. These conditions have made it difficult for many consumers to keep up with their auto loan payments, leading to a significant increase in defaults.

Credit Card Defaults: Escalating Financial Stress

Over the past four months in 2024, credit card default rates in the United States have continued to rise, reflecting increasing financial strain on consumers:

• July 2024: The credit card delinquency rate was around 3.16%, up from 3.08% in the previous quarter. This indicates a persistent upward trend in defaults as consumers struggle with higher costs and economic pressures.
• June 2024: The delinquency rate remained elevated, highlighting ongoing financial challenges for many credit card holders.
• May 2024: Defaults continued to rise, driven by factors such as high-interest rates and increased living expenses.
• April 2024: The delinquency rate saw a notable increase, with more consumers falling behind on their credit card payments due to economic difficulties and inflation.

The increase in credit card delinquencies is primarily due to higher interest rates, which have made it more expensive for consumers to carry balances, and rising inflation, which has put additional pressure on household budgets. Younger borrowers, in particular, have shown higher delinquency rates, indicating significant financial stress within this demographic.

The rise in credit card delinquencies and auto loan defaults, coupled with increasing unemployment rates, highlights the financial pressures many consumers face. Taking proactive steps to address debts and understanding legal rights can help mitigate the impact of these financial challenges. For those affected, seeking professional advice and exploring all available options is crucial for managing and overcoming these difficulties.

A Call to Action: Are You Struggling Financially? Need Help? If you're struggling with overwhelming debt, late on credit card payments, or facing wage garnishment, Attorney Omar Zambrano is here to help.

We offer free consultations to guide you through your financial struggles and explore bankruptcy and debt relief options.

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Attorney Omar Zambrano

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