finance

Friday, Jan. 4

  By Brigitte Yuille
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Consumer bankruptcy filings surge in 2007

U.S. consumer bankruptcy filings surged nearly 40 percent in 2007 compared to the previous year, according to the latest data from the American Bankruptcy Institute, or ABI.

More than 800,000 consumers sought relief of their debts through bankruptcy compared to 573,203 filers in 2006, according to the ABI report.

Jessica Cecere, president of Consumer Credit Counseling Service of Palm Beach County/Treasure Coast of Florida Inc., says 21 percent of those 801,840 filers seeking bankruptcy counseling were seen through a network of Consumer Credit Counseling Service offices in Florida, Georgia, Mississippi and Tennessee.

Debtors are required to participate in bankruptcy counseling at a government-approved counseling agency before they can file. They receive a certificate upon completion, which is to be included in the papers that must be filed in bankruptcy court.

Cecere says the network of CCCS agencies have seen between 25,000 and 30,000 debtors per month for bankruptcy counseling.

"A lot of people coming in for bankruptcy counseling have medical debts, or are facing medical issues," she says.

Consumer bankruptcy filings decreased in December by 7.5 percent, compared to November. Bankruptcy insiders predicted that this slowdown would occur during the holiday season since many law offices and court systems close.

Bankruptcy filings are expected to increase even more this year because of consumer spending and the housing mortgage crisis.

Share your thoughts at bankruptcyblog@bankrate.com.

Is reducing your debt taking a backseat to reducing your weight?
Either you forgot to pay your bill, or you didn't have enough money. Don't worry. You're not alone.

A quarter of Americans missed making one or more on-time bill payments last year, according to an annual survey sponsored by TransUnion's TrueCredit.com. The credit bureau's Web site provides services and products to help consumers protect and improve their credit. The bills skipped were for utilities, credit cards and medical services.

TransUnion, which is among the top three credit repositories in the nation, tapped GfK Roper Public Affairs & Media to conduct a study last month that would determine American's thoughts about their finances before the new year.

The interviews of 1,004 adults across the nation revealed that fewer consumers are making debt reduction their top goal for the new year. Instead, it's taking a backseat to eating healthy or losing weight, spending more time with the family and furthering their education.

The survey also found that top financial concerns are salary levels or job prospects and making nonmortgage payments. Nearly all of the young adults ages 18 to 24 participating in the survey are worrying about their finances this year. More than two-thirds of those 65 years old or older worry about their finances as well, but quite a few are concerned about the value of their stocks and other investments. Mortgage payments appear to rattle 35 to 49 year olds.

Lucy Duni, director of Consumer Education for TrueCredit.com, thinks reducing debt has become a lower priority because it may indicate that "more consumers are struggling today just to maintain their financial status quo."

She advises those who aren't meeting their monthly payments to either set up automatic withdrawals to ensure they don't miss a billing cycle or contact the creditor to see if a payment arrangement can be made for their situation. Or both.

Share your thoughts at bankruptcyblog@bankrate.com

Your debt resolutions
Welcome to a new year when you will finally reduce your money troubles and handle that debt.

I hope my blog entries have helped and will continue to help you in this journey, and keep you clued in on the latest information in bankruptcies.

Let's get started.

Recently, a single mother shared her struggles with debt, saying that she feels as though she has been in a recession for two years.

"I thought I was a single mom who was making a decent wage, but for the past two years those wages aren't getting me from month to month. I ended up having to use credit cards to get me through and now those are maxed out. The bills are so high I can't make the monthly payment.

"With the rising prices of gas and food, I still can't handle the monthly expenses of a family of three (myself and two teenage boys) even if I don't pay the minimum on my two maxed-out credit cards.

"I have many medical conditions so a second job is out of the question and my health expenses are outrageous even with health insurance. Prescription costs are outrageous, but don't make a dent compared to the 20 percent of hospital bills owed after my insurance pays the first 80 percent. Oh and by the way, co-pays and deductibles are increased in 2008 ... I highly doubt that the chump change raise I will receive will cover the extra costs of medical benefits.

"Even if I wanted to, I don't have the money to file for bankruptcy. Somehow I don't think this is the life I imagined having as a child or as a teenager."

In this case, I would suggest the mother visit a credit counseling agency to help organize her finances. The agency can offer free or affordable assistance. She should review the Bankrate feature " FAQ about debt and credit counseling," which addresses frequently asked questions regarding debt and credit counseling.

She can visit the Association of Independent Credit Counseling Agencies or the National Foundation for Credit Counseling Web sites to locate an agency in her area.

Debt tips
As you draw up your New Year's goals, include the following debt tips provided by the Consumer Credit Counseling Service of Greater Atlanta:

  • Balance your checkbook each time you receive your paycheck.
  • Keep your bills in a filing cabinet or a secured box.
  • Create a monthly spending plan and figure out your monthly income and recurring expenses.
  • Prioritize your expenses by determining your "needs" and your "wants" (psst … I'm working on this one, too).
  • Don't be limited to saving for retirement; diversify your savings plan and think about those unexpected expenses such as medical emergencies or car repairs.
  • Know the signs of debt problems.
  • Take action. Contact a debt professional.

Share your thoughts at bankruptcyblog@bankrate.com.

Read more in the Bankruptcy Blog archive

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