Total household debt rose for the first time in almost four years during the last quarter, but total family wealth also improved, according to a report from Reuters that cited data collected by the Federal Reserve.

Sources indicate that rising levels of household debt suggest that American consumers may soon start ramping up their spending on goods and services.

Increased consumption may be promising news for the economy as a whole, but it could spell trouble for individual consumers, many of whom may turn to bankruptcy to help relieve their debts.

Household Debt Starts Climbing Again Statistics related to household debt paint a picture of an economy that is starting to regain some traction, according to a Reuters report:

• Wealth rises, too. In addition to the fourth quarter rise in household debt, that period also saw household wealth increase by $1.2 trillion, which could also lead to more spending in the near future.
• Total liabilities. Sources say that total household liabilities were worth 117.5 percent of disposable income in the fourth quarter. This was a slight dip from the prior three-month period.
• Credit rises. Consumers took out 6.9 percent more credit at the end of last year, although mortgage debt dropped by a fairly significant margin.
• Total wealth rises. For trivia buffs, total household net worth was measured at $58.455 trillion. Experts attribute the gains in household wealth to a jump in the value of financial assets like stocks and bonds.

The latest news show that American households are starting to recover from the collapse of the housing bubble in 2008, which led to plummeting levels of wealth across the country.

Now that housing prices are on the rise, and the stock market has begun to regain its footing, households across the country are making subtle but steady gains.

If housing prices continue to rise at a modest pace, and the unemployment rate continues its downward trek, wealth levels may soon rally to their pre-recession heights.

Bankruptcy and Debt Relief

Of course, as households begin to recover from the recession, many consumers are still looking for debt relief, especially if they are the victim of aggressive creditor actions like wage garnishment or foreclosure.

Fortunately, by filing for bankruptcy, consumers can receive the benefits of the automatic stay, which often halts collection lawsuits, wage garnishment, or even home foreclosure proceedings.

Contact a local bankruptcy lawyer today to learn more about the potential benefits of the automatic stay.

By now, most of us have encountered a news story or blog post about the infamous “pink slime” beef by-product.

“Pink slime,” a concoction of unused pieces of cow used as filler in meat, first gained notoriety when an article cited use of the grotesque by-product in McDonald’s restaurants. The onslaught of media coverage and public outcry that followed caused a massive drop in demand from restaurants.

AFA, makers of “pink slime”, have filed for Chapter 11 bankruptcy, according to ABC news. The blame for their financial decline has been cast solely on the media's portrayal of the formerly unheard-of substance.

Bad Press Can Cripple An Industry

Numerous fast food chains, including McDonald's and Taco Bell, have already pulled “pink slime” from their products and supermarkets have stopped carrying meat containing the aptly named ingredient.

Companies such as Beef Products Inc., one of AFA’s main competitors, have also been affected by a massive decrease in sales.

Despite the uproar from critics, it was recently revealed that 7 million pounds of “pink slime” beef product is destined to be used in school lunch programs in the US. AFA’s claim that the media has ruined business for them may or may not be substantiated but what we do know is that “pink slime” was a huge moneymaker.

What we can glean as Americans from this abrupt shift in the meat industry is that no one is exempt from financial downturns.

These industry giants have gone from providing product to the nation’s largest fast food restaurants and supermarkets to not knowing if they’ll be able to stay in business. Even companies like AFA, who according to Reuters, produces more than 500 million pounds of ground beef annually, aren’t exempt.

Business Bankruptcy Can Mirror Individual Bankruptcy

• It’s no secret that Americans like their “things”. These things that we all hold so near and dear can cause attachment issues. Businesses can be the same way but we all must recognize that, whether you’re a Fortune 500 company or a plumber from Ohio, “things” are expendable.
• Do your research. It takes time and knowledge to decide what’s best for a large company like AFA and the same goes for individuals mulling bankruptcy. By taking the time to gain accurate information you’ll be better informed to make the right decision when the time comes.

Preparing for Bankruptcy

• Not unlike AFA’s quick downturn, many people can experience a sharp decline in income and be hit hard financially. As fast as one’s finances can get out of hand, it is important to have some preparation if possible.
• AFA’s reason for filing will be undoubtedly different from yours (unless you’re some sort of closet “pink slime” producer) but it is important to identify the problem. Carefully go over your financial info in order to see where your trouble lies. This may take some time and careful combing of your financials.

Forbes reported this week that Sprint shares plummeted after one analyst gave the company a less-than-rosy financial rating and noted that he believed it has a 50 percent chance of filing for Chapter 11 bankruptcy protection.

But here’s the kicker: Sprint’s financial fate is closely tied to the predictions and analyses issued about its future. After an analyst downgraded Sprint’s stock status, its share price dropped from $2.50 to $1.75, illustrating how quickly investor expectations can become reality.

Of course, Sprint is facing legitimate challenges to its business model, and would likely have suffered a decrease in its stock price eventually, even without the analyst’s comments. But the plummeting stock price won’t do the company any favors as it tries to get back on its feet. Here’s how your finances are more or less the same.

The Predictive Power of Your Credit Rating

The individual equivalent of Sprint’s public rating is the credit report and credit score. When you have a low credit score…

• You’re seen as a “bad risk” by lenders. Because of this, they are less willing to extend you loans. Those loans you are able to secure will come with higher interest rates than they would if you were deemed a “good risk.”
• You pay more to borrow. Over the course of the repayment of your loans (which may come in the form of a credit card, a mortgage, a car loan, etc.), you will end up paying more in interest than someone who had stronger credit than you.
• You have less money. More of your money goes toward loan payments and less of it goes toward savings and paying down other debts. The more debt you have and the less you have saved, the more your credit score will suffer, meaning that it will continue to be difficult for you to get attractive loans.

Of course, the opposite is also true: if you secure a good credit rating, you will qualify for loans with lower interest rates, leaving more of your money available to pay down debts, save, and generally improve your credit worthiness.

Break the Debt Cycle & Build Stronger Credit

There’s no fast way to build stronger credit. Negative credit actions (including foreclosures and bankruptcy filings) remain on your credit report until their statutes of limitations expire.

But while the process isn’t fast, it is fairly simple. The easiest way to improve your credit rating is to ensure that you pay all your bills on time. Set up a plan for paying down debt, save money, and eventually the positive actions on your credit report will start outweighing the negative ones.