From the New York Times:
A Growing Burden of Home Debt
By BOB TEDESCHI
CREDIT counselors are finding that mortgage debt is playing a bigger role in the deteriorating financial health of consumers contemplating bankruptcy.
In a survey released last month by the National Foundation for Credit Counseling, a nonprofit group representing 115 counseling organizations, the average person receiving financial advice before filing for bankruptcy in the last year earned $27,000 annually and had $38,500 of unsecured debt spread over eight credit cards.
Over the first six months of that 12-month survey period, consumers receiving counseling had, on average, $2,000 more in unsecured debts but nearly $4,500 more in annual income.
“Consumers are upside down financially,” said Susan C. Keating, chief executive of the foundation, which is based in Silver Spring, Md. “Those who are considering bankruptcy have unsecured debt well in excess of their annual income.”
…
“Mortgage debt is coming out as much more significant than we expected,” Ms. Keating said. “Pull this all together with the other unsecured debt people have, and this is really problematic.” The foundation, she added, will intensify its attention to mortgage counseling over the next year, partly in anticipation of more demand from consumers whose home loans are growing more burdensome.
“Mortgage debt is coming out as much more significant than we expected,” Ms. Keating said. “Pull this all together with the other unsecured debt people have, and this is really problematic.”
And it’s only just beginning. “Usually”, this occurs after the blowout!!
In the last year (since passage of the bankruptcy bill) credit counseling agencies have been talking somewhat schizophrenically. On one hand, the number of people filing for bankruptcy has gone down (though not quite as much as expected), but the number of people seeking credit counseling, now a prerequisite for filing, is through the roof. And credit counselors are saying many of these people are in such bad shape, they may not even file for bankruptcy as the process is too costly.
The scope of this mess is almost unfathomable and the combination of regulatory changes, insane lending practices, and stagnant wages has created a an environment where people are simply going to give up.
Lindsey….
very good post.
SAS
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