Debt Management and Our Tax Returns: Low Consumer Confidence Means Extra Cash Goes to Debt Relief

May 2008

With the much-awaited tax rebate reaching consumers in the coming months, economists are hoping that instead of opting to use that money for debt management, many Americans will use it to purchase other goods that will boost the economy.

But with consumer confidence at a 16-year low, the American people are thinking of this tax money as a boon for debt relief, and few plan to spend the money on extras.

American debt is at an all-time high, and with the costs of living as they are, paying for home loans, gasoline, food, and health insurance leaves many people without the option of spending on vacations or fun items.

The weakened job market has also made an impact, leaving many people to scramble for debt relief options after they've lost a job, or been unable to find steady work. This trend doesn't bode well, since consumer spending accounts for more than 2/3 of the nation's economic activity.

What this means is that debt management is the about the only place where growth will be seen for a while, and the boom in "loose lending" and the real estate market won't be recovering in many parts of the country for years to come.

Unfortunately, those people who can't manage to find a debt relief program could find themselves in hot water with or without their tax return, which could also lead to a new record in bankruptcy filings.

But bankruptcy will take many years to overcome, leaving ruined credit behind for 7 to 10 years after filing. In some cases lenders and even employers will want to know if an individual has ever filed for bankruptcy.

This is why a good debt management program is the best way to get a handle on your finances. Using that tax rebate to pay down debts is also a good way to get started; it may not guarantee consumer confidence, but it can leave those same consumers with a little more breathing room in the coming months.