Americans are headed to bankruptcy court in record numbers this year, after having broken the record over the last several years. It’s not just the economy, since every year – even through the boom years of the late 1990s – the number of filings have outpaced the year before.
The first quarter of the year, 404,154 non-business bankruptcies were filed across the country, up by nearly 10 percent the same period last year.
Also, the Joint Center for Housing Studies of Harvard University reported mortgage delinquency rates are on the rise nationwide – between 400,000 to 450,000 homeowners foreclosed their homes by the end of 2002 – almost double the rate in 2000. Fortunately, it has been well below the delinquencies of the mid-1980s. A delinquency is when a conventional loan is 90 days past due.
Why are we seeing so many Americans in such dire straits? Well – it’s not just the recession and job loss. The American Bankruptcy Institute reports that consumer debt is consistent with bankruptcy filings. We just take on way too much debt and can’t pay it off.
“Research by the Federal Reserve indicates that household debt is at a record high relative to disposable income. Some analysts are concerned that this unprecedented level of debt might pose a risk to the financial health of American households,” ABI reports on its web site www.abiworld.org. “A high level of indebtedness among households could lead to increased household delinquencies and bankruptcies, which could threaten the health of lenders if loan losses are greater than anticipated.”
While I would much rather write this column from a preventative perspective, instead, let me give some direction from the Web to those who are about to sink. Once you get back in shape – vow on your great-great-grandmother’s grave, that you’ll practice the GOOD policy – Get Out Of Debt.
If you enter Avoid Foreclosure on your favorite search engine, you get about a bazillion sites that come up. Many of them are reputable, many are not. If you’ve never heard of the organization, approach them with trepidation. Find out who they are, how long they’ve been in business and what complaints have been filed against them.
I would start with the U.S. Department of Housing and Urban Development, which has developed some guidelines for homeowners who are facing the possibility of foreclosure. Here are their suggestions to help you avoid foreclosure.
Facing a financial downfall is one of the most embarrassing and debilitating things to happen to a household. Nevertheless, take control of your destiny – work the system. Don’t let the system work you.