NEW YORK (TheStreet) -- Consumer debt continued to shrink last quarter, according to a new report by the Federal Reserve Bank of New York.
At the end of the third quarter, consumer debt totaled $11.6 trillion, down $922 billion, or 7.4%, from its peak level two years earlier and a decline of 0.9% from the second quarter, says the quarterly report on household debt and credit.
Excluding mortgage and home equity lines of credit (HELOC) balances, consumer indebtedness fell 0.3% last quarter to $2.3 trillion, the report says.
During the third quarter, the number of new bankruptcies dropped 16% sequentially, yet still rose 1% compared to the year-earlier period, to 522,000.
The financial crisis of the last few years and resulting economic recession placed a crimp on consumer spending habits. The last decade saw consumers using record levels of leverage, facilitated by low-interest or temporary no-interest credit card loans, mortgages with loan to value ratios of up to 110% and other forms of credit.
The addition of record high unemployment has caused retail banks and credit card lenders including Bank of America (BAC) , JPMorgan Chase (JPM) , Citigroup (C) as well as Capital One (COF) , American Express (AXP) and others to feel the pain as consumers were unable to pay their bills.
Credit cards have been the primary source of debt reduction over the past two years.
Consumers continued to shore up their credit accounts last quarter, albeit at a slower rate of decline, the New York Fed says.