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Is there a link between debt and depression?

On Behalf of | Jun 3, 2024 | Debt Relief

Debt is part of the modern American lifestyle. Most people use credit cards regularly. Soaring medical costs and limited insurance availability leave some people struggling with massive medical bills. Job loss, divorce and a host of other unpredictable circumstances can push people to the financial edge.

Many households carry thousands of dollars in credit card debt and a variety of other financial obligations. People may not make enough to cover all of their costs every month. That ongoing financial strain can eventually take a mental toll on those who can’t overcome their debt. There is a direct link between high levels of personal debt and an increased risk of depression.

How can debt affect mental health?

Concerns about finances are a leading cause of stress in the United States. People report losing sleep over the stress they feel because of mounting debt levels or budgets they can’t balance. Collection activity can worsen that stress by making people fear answering their doors or their phones.

Self-criticism often compounds financial stress. Many people blame themselves for their financial hardship even if circumstances beyond their control put them in the situation. People may also worry about or experience social stigma related to their debts.

Bankruptcy can offer immediate relief

The bankruptcy process is not instantaneous. It takes months or even years to complete. However, someone who files for bankruptcy can receive some debt relief the same day that they file. The courts issue an automatic stay for those in the process of bankruptcy. Creditors generally need to cease communicating with filers and halt all collection activity. The automatic stay can help resolve concerns about creditor lawsuits, vehicle repossession and foreclosure.

If the bankruptcy is successful, the person filing can discharge their eligible debts at the end of the process. In some cases, people can also renegotiate their secured debts in a way that makes them easier to manage.

People shouldn’t have to sacrifice their mental health because of temporary financial challenges. Filing for personal bankruptcy can help alleviate the depression and anxiety triggered by challenging financial circumstances. Bankruptcy filers can change their situation and may be able to improve their mental health as a result.