Thread: Personal bankruptcy filings surge

Wed, Aug. 29, 2007

Personal bankruptcy filings surge
By MADLEN READY
The Associated Press

NEW YORK -- More Americans are filing for bankruptcy again after last year's hiatus, and credit-card default rates are spiking.

Although the percentage of payments being written off as uncollectible isn't as high as it was a couple of years ago, the conditions are ripe for it to grow. Bankruptcy filings keep pouring in, home prices continue to fall and energy prices remain high.

According to data from Moody's Investors Service, credit-card companies wrote off 4.58 percent of payments between January and May, up nearly 30 percent from the same period in 2006.

"In 2007, we expected an increase, as bankruptcy filings returned to more normal levels," said Jay Eisbruck, managing director in Moody's asset-backed finance group. He called this year's resurgence in bankruptcy filings the primary reason that credit-card default rates have soared.

In mid-2005, the default rate for credit-card payments was around 6 percent, and in 2004, it was even higher. Then it fell to about 3 percent in late 2005 and early 2006 after changes in U.S. law made it more expensive for individuals to file for bankruptcy and filings dropped.

Now, bankruptcy filings are flooding back in. According to the Administrative Office of the U.S. Courts, filings nationwide jumped 66 percent in the first quarter. That's causing default rates to soar, because getting bankruptcy protection usually means you're released of your credit-card obligations.

Falling home prices are one factor prompting more people to file for bankruptcy. Standard & Poor's reported Tuesday that U.S. home prices fell 3.2 percent in the second quarter, the steepest decline since 1987, when it began its nationwide housing index. When home prices depreciate, it's harder for many homeowners to access cash by refinancing their mortgages. Some homeowners, especially those stuck with high-rate loans, can't make their payments.

But the problem with bankruptcy filings in the U.S. -- and in turn, the nation's credit-card debt -- is bigger than the slumping housing market, experts say.

"Bankruptcy filings have rebounded because consumers continue to feast on a diet of debt," said Greg McBride, senior financial analyst at Bankrate.com.

Rates for credit-card delinquencies, meanwhile, have held up relatively well.

According to the Moody's data, credit-card delinquencies rose just under 4 percent between May 2006 and May 2007. People are usually delinquent before they file for bankruptcy; after they file, they are written off.

The credit-card delinquency rate in the first quarter was still higher than most other types of debt, according to data from the American Bankers Association. But it declined from the fourth quarter of 2006 while several other types of debt -- home-equity loans, property-improvement loans, indirect auto loans and personal loans -- saw delinquencies rise.

http://www.star-telegram.com/business/story/216864.html

Gee, you mean you can't outsource and replace millions of US workers jobs ( by 'legal' importation or illegal border jumpers) and not have tertiary side effects?

What economic geniuses are running this show anyway???

Hey, I don't need articles to tell me people are in trouble. They are not buying hardly anything except gas and food.

The financial life blood of America has been drained out and our citizens are starting to wither while big corporations flood the country with illegals to try and prop up the bubble!

W

Where I am the middle class is tapped out, we are all upside down on our mortgages and can't sell, even those of us who never borrowed against the equity because prices have plummetted, and there are vacant houses on my block again this summer. When I drive home, whatever route I take, whether I go through residential, industrial, warehouse, or office districts the landscape is the same: peppered with signs reading, "for rent" "available" "vacany" "rent to own" "for lease" "move-in special" and so on.

The members or the board of the Federal Reserve Bank are sitting back laughing as all this takes place. REPEAL THE FEDERAL RESERVE ACT!!!

As some know already, I live in two vastly different parts of the country for major portions of each year. Both areas are most certainly in an economic slump worse than I've ever seen. People have to choose between gas to get to work and those little trinkets they used to buy without thinking about it.

And, when the Boomers all retire and start drawing against those 401K's that are propping up the DOW, what do you suppose will happen then?

The creditors have been predatory in their lending practices. But I was under the impression that two or three years ago Bush signed a bill into law that said people couldn't declare bankruptcy to get out from under credit card debt. Did that happen or not? If it did, then probably the reason for the increasing number of bankruptcies is because people are trying to get in under the wire before the law goes into effect.

To me, the mortgage lenders and credit card companies are bottom feeders who deserve to loose their butts but I sure hate to see them drag the rest of us down with them.

Drive around any area of your locality and count the number of houses for sale. Look at the local paper and see how many are up for sale on the courthouse steps. The number is staggering!

It has become harder to discharge credit card debt under bankruptcy - you may be forced into a chapter 13 (you pay off a chunk of it) whereas before you could get a chapter 7. What's more, I got contacted by a Chase representative who tried to talk me into letting them turn my prime mortgage into a subprime!!! And I've never let it go over 30 days late for many years now!