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Will higher credit limits lead to more consumer debt?

When lending institutions make it easier for Americans to take out credit, the move is seen as evidence of an improving economy. Banks in Washington, D.C. and throughout the rest of the nation often hold back on making loans and credit offers when they fear that consumers will be unable to pay back their obligations. When getting loans becomes easier, however, it usually means that lenders have faith in the country's financial health.

In some cases lenders are making it easier for people with low credit scores or presumably bad credit to get more money through loans. This practice can be seen as a good thing or a bad thing. For those who desire to rebuild their credit following a bankruptcy or other financial struggle, easier access to credit can be beneficial. However, for those who cannot manage their debts, greater loan amounts usually mean greater financial challenges for overcoming consumer debt.

As credit access increases across the nation, more people may begin to seek out debt relief options. Credit counseling and other government-offered assistance programs can help people get themselves back on solid financial footing. In some situations, though, a person may not be able to regain control of the person's financial life without drastic measures. In those situations, bankruptcy can be a viable legal choice.

Bankruptcy can help a consumer debtor reorganize or liquidate the person's financial obligations in order to start over on a blank economic slate. Starting a bankruptcy filing takes planning, and those who are interested in exploring bankruptcy options can do so through the bankruptcy courts. With more credit being extended to Americans, more citizens may find themselves contemplating bankruptcy to manage their debts.

Source: The Detroit News, "Higher credit card limits raise debt concerns," E. Scott Reckard and Dean Starkman, April 20, 2015

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