With the downturn in the economy in the last several years many Americans ended up increasing their debt load just to get by. This included not paying off mortgages or increasing credit card debt.

However, according to a recent monthly report on debt, the amount of credit card debt and mortgage debt owed has dropped for the average Californian. Unfortunately, it looks like it is coinciding with credit scores dropping too.

At the end of the year, the average Californian owed around $314,000 on their mortgage. In June, the average Californian owed only around $301,000. Credit card debt dropped substantially as well. In June, the average Californian owed around $5,600. But at the end of 2012, that figure was close to $6,400.

The bad news is that along with this data there are indications that credit scores are also dropping. In June of 2011, the average credit score was 685. This June of this year it was 671.

One possible contributing factor is that filing for bankruptcy can discharge credit card debt, but is can also affect your credit score. There are two types of personal bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 filing the debtor can discharge debts, including all credit card debt. In Chapter 13, the debtor creates a debt repayment plan that can lower interest rates and fees, but the debt must still be repaid.

One main benefit of filing for any bankruptcy is that is puts an automatic stay on all creditor actions. This means that all creditor actions, including foreclosure, mechanics liens and wage garnishments, are stopped after it is filed.

Source: Sacramento Business Journal, "Average credit card, mortgage debt drops in state," Melissa Wiese June 11, 2013