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Pandemic-weary South Floridians are maxing out their credit cards and living beyond their means more than anywhere else in the nation, according to a new survey.
In a survey of 100 metropolitan areas released Wednesday, LendingTree, the national online lending marketplace, found that one in three people in South Florida has maxed out a credit card. Four in 10 are spending at least 35% of their income on housing, the survey found.
Researchers who surveyed consumers from Miami-Dade to Palm Beach counties said South Florida has the greatest percentage of people living beyond their means.Four other Florida metro areas also finished in the top 10: Deltona (fourth), Lakeland (fifth), Orlando (ninth), and Jacksonville (10th).
South Florida rated the worst for debt-to-income ratios, with residents’ debt averaging 163% of their income. The region also was worst for the average number of credit inquiries per consumer in the last two years (4.6); the percentage of credit card holders with one maxed-out card (33.1%); and the percentage of households spending at least 35% of their incomes on housing (37%).
Financial advisers generally advise that people should not spend more than a third of their income on housing.
For financial counselors and bankruptcy lawyers. the scenario looms as a frightening one as Florida and about two dozen other states have suspended federal unemployment aid or soon will. Meanwhile, eviction moratoriums employed in response to the coronavirus pandemic are set to expire at the end of this month.
Bankruptcy filings picking up
Chad Van Horn, a Fort Lauderdale-based bankruptcy lawyer who focuses on consumers, said he anticipates a surge in people seeking to expunge their personal debts through Chapter 7 liquidations or repay them through a Chapter 13 plan.
In the Southern District of Florida, which stretches from Key West to Fort Pierce, Chapter 13 bankruptcy filings have already risen compared with last year. In May, filings rose to 400 from 322; in April ,the numbers climbed to 378 from 248.
“We’re seeing an influx of Chapter 7,” Van Horn said. “We filed 100 cases last month, which is the largest number we’ve filed.”
Since the pandemic struck down the economy in March 2020, state and federal aid programs produced the effect of keeping many consumers out of bankruptcy court as households deferred spending or even paid down debt. But as those programs start to expire, more consumers may head for court.
“I’m scared to death of what’s going to happen after the end of this month,” Van Horn said.
That’s when federal moratoriums on evictions and foreclosures come to an end. Moreover, in another two weeks, Florida is expected to join other states that have ended their participation in a federal supplemental unemployment benefit program that added $300 weekly to state jobless benefits. That program is seen by many — mostly among Republican politicians — as a disincentive for the unemployed to return to work
“The courts are already gearing up, and they’re bringing back retired judges to handle the foreclosures and evictions that are coming through,” Van Horn said.
Schulz, of LendingTree, agreed that the end of aid programs will force consumers’ hands.
“A lot of folks got forbearances and deferments,” he said. “Between various laws and regulations it ended up driving delinquencies and bankruptcies down generally during the pandemic. But we shouldn’t be surprised to see [both] climb in the next few months as people start to be required to make payments consistently again.”
Schulz advises consumers to make their flagging personal finances a top priority:
- Start a budget.
- Negotiate lower interest rates with the credit card companies. “You can pick up your phone and ask your credit card issuer for a lower interest rate,” Schulz said, adding that a separate survey found that 80% of the people who asked obtained some relief.
- Make some financial sacrifices.
“The only other thing I would reiterate is the importance of not sitting on your hands when you have real debt issues,” he said. “The worst thing you can do is nothing. There are programs out there that can help and make a really big difference.”