The big payback: Americans pare debt

NEW YORK (CNNMoney.com) -- American households continued to pay off debt in the second quarter, according to a report released Tuesday, although delinquency rates remained high in certain U.S. states.

The Federal Reserve Bank of New York said total consumer debt was $11.7 trillion as of June 30. That's down 3.3%, or $400 billion, from $12.1 trillion at the end of March. After hitting a record high in September 2008, consumer debt has dropped 6.5% over the last six quarters.

In addition, total household delinquency rates fell in the second quarter for the first time since early 2006. The report said 11.4% of outstanding debt was in some stage of delinquency at the end of June, compared to 11.9% on March 31.

As the economy expands at a sluggish pace after emerging from a deep recession earlier this year, many U.S. consumers have cut back on spending and reduced debt. But persistently high unemployment and the shaky housing market continue to weigh on household balance sheets.

Despite the decline in overall delinquency rates, the report said the number of people with a new bankruptcy noted on their credit reports rose 34% during the quarter. That's significantly higher than the typical increase during the second quarter, which has been closer to 20% in recent years.

"Major declines in house prices and the continuing high level of unemployment are reflected in the various measures of household debt and credit," Wilbert van der Klaauw, vice president in the research and statistics at the New York Fed, said in a statement. While overall trends have improved, he cautioned that there are "clear differences of distress" among the 12 districts in the Federal Reserve system.

Households in states where the housing bubble was most pronounced continue to struggle with the fallout of the recession. Arizona, California, Florida and Nevada had higher-than-average delinquency and home foreclosure rates.

Nevada had the highest foreclosure rate, with 0.7% of consumers receiving a new foreclosure notation on their credit report during the second quarter. Arizona was the next-highest, with 0.6% of consumers with new foreclosure notations.

Nationwide, mortgage debt has declined 6.4% since hitting a high in 2008. Home equity lines of credit, or HELOCs, have fallen 4.4% since early 2009.

Excluding mortgage and HELOC balances, which make up the bulk of consumer debt loads, overall consumer debt dropped 1.5% in the second quarter to $2.31 trillion, the report said.

Total consumer indebtedness was highest in California and Nevada. The average per capita debt balance was $78,000 in California and $73,000 in Nevada. That's compared with $49,000 nationally.

This was the first in a new series of quarterly reports from the New York Fed. The goal is to help community groups, small businesses, state and local government agencies monitor trends in borrowing and indebtedness at the household level.

"By providing greater access to these data, we hope stakeholders will be better equipped to assist distressed households in their communities," said van der Klaauw.