Bankruptcy filings are nearing the record 2 million of 2005, when a new law took effect that was aimed at curbing abuse of the system. Filings could reach 1.7 million this year, says law professor Robert Lawless, but few experts believe that debtors are now gaming the system.
Instead, concern exists about a growing number of Americans who need bankruptcy protection but cannot get any benefit from it or simply cannot afford to file. As their financial problems worsen, that hurts everyone because it can hinder the economic turnaround.
"It's shocking that we are back to the 2005 level," saysKatherine Porter, associate professor of law at the University of Iowa. "And the filing rate doesn't even begin to count the depth of the financial pain."
Bankruptcy laws changed in 2005 because filings skyrocketed and credit card companies and banks wanted to weed out deadbeat borrowers. The law made it harder — more expensive and more restrictive — for individuals to file Chapter 7 bankruptcy, which erases most debts.
Instead of seeking protection from bankruptcy, a number of debt-laden Americans have gone into a "shadow economy," or informal bankruptcy, according to some experts.
The signs are there: Student loan defaults and home foreclosures are rising, and bank card loan defaults have increased from 7.7% in March to 9.1% in April, according to S&P/Experian Consumer Credit Default Indices. But during the same two months, bankruptcy filings fell by 4%.
Bankruptcy is supposed to provide a fresh start to people who are in serious financial distress. But only a fraction are filing, Porter says.
'My future is gone'
Carmen Gardiner, 25, a 2007 graduate of Louisiana State University, is weighed down by her private student loans. Her debt is now about $80,000, and her monthly payments are more than $600. Gardiner's undergraduate degree is in psychology. She lives with her husband, who is still in college, and earns $13 an hour at a call center in Atlanta. They have a 6-month-old daughter.
She hasn't defaulted on her student loan. But she doesn't see much hope. Bankruptcy would not discharge her debt.
For those people who are now under threat of arrest because of debt collectors who are terrorists, bankruptcy seems to be the get out of jail card - though not free.
ReplyDeleteObviously marriage should wait and you shouldn't move out of your parents house if you don't have to.
ReplyDeleteMost young people are also pressured to go to school because they think that is what is mandatory otherwise they'll live poor. Well, this is the 21st century and degrees are now becoming worthless if not wreckless to pursue. 80,000$ in debt? What a shame. Not to mention it seems like she didn't even know why she got a degree in psychology. Babies don't help on top of that. Six month old daughter? That means that she had the baby in the midst of her financial troubles. One dumb move after another. What's next? Is she going to go back to school to further her education with a 100K loan?
There is no one to blame for this except her own foolishness.
To any teenagers or 20-somethings reading this, take this advice to avoid such a situation: Continue living with your parents, don't rush off to get an apartment which you can not afford or to go to a university, don't get pregnant or married, read books and educate yourself, and stay away from other young people who will influence you to go the opposite direction.
The future is coming wicked fast as things are about to collapse. We have older people that are going to fare okay, but they are not the future. We are going to need more youngsters who are sober minded, intelligent, fit, disciplined, and diplomatic/mannered. You won't get any of those qualities at a college.
I don't get it....are we supposed to feel sorry for this 25 year old woman for having $80,000 in student loan debt she can't pay? I didn't go to college - couldn't afford it. And I advised my kids who are in their 20's to work their way through community college, which they did. So how would it be fair if people like this, that got themselves in way over their heads by their own choices, would be allowed to just walk away from their debts? Unbelievable.
ReplyDeleteMissy had better get her hands on one or two ounces of silver to offset that $80,000 debt once hyper-inflation hits.
ReplyDeleteOh, that's right. She doesn't know that, even with that expensive college education of hers. Ridiculous.
I can't even feel sorry for this fool. In fact, I'm tiring of people like this. We have way too much tolerance in North America, to a fault.
So many young college airheads, even with masters degrees, couldn't tie their laces without mommy. A bunch of people that couldn't face life so they stayed coddled in school.
ReplyDeleteTwittering twits.
Got to hand it to the banksters. They made sure back in the 70s to make student loans stay with the student no matter what. No bankruptcy, no escape.
ReplyDeleteEducation in America is a disgrace, including College educations. The average college graduate is nothing more than a non-thinking automaton for the state. Another worker bee.
The smartest people I've known in my life never graduated high school.
Gold keep falling now trading bellow $1220
ReplyDelete5:40 so what? Gold will fall, then back up and you'll be saying: GOLD falling now trading under $1500
ReplyDeleteLOL, how ironic, too broke to file.
ReplyDeleteDoesn't yew wurry none masa! Thems folks up in there Cawgress will pass em bill to pay fer ur goin broke masa
5:40, your a dumbass.
ReplyDeletehttp://www.kitco.com/charts/livegold.html
"...and banks wanted to weed out deadbeat borrowers."
ReplyDeleteNo they didn't or else they would have stopped lending to them long ago. The truth is, troubled borrowers have to pay usory interest rates which the lenders thought meant high profits for them. The reason they wanted the law changed was so they could financially enslave this class of people to making monthly payments for the rest of their lives without ever getting near paying off their debt.
There ARE deadbeat borrowers and many young people or uneducated people who make bad decisions, but these companies went after them with some extremely aggressive and predatory lending tactics.
If banks really wanted to stop lending to losers, the housing crash would have been minor compared to what it is now.
Hmmm... Coming from a tax pro, I have to break the bad news to her. Bankruptcy wont protect you miss, you are screwed. Be prepared for wage garnishment if you default.
ReplyDeletereally all this blame on the girl, shame on you condescending basturds.. you are the same people that would say go make something of yourself...of course goin to lsu not wise but wisdom is not her issue..it's her parents! you drugged up hippies of the gen before hers with ur let them make their own decisions and don't spank etc u are to blame ur pointless non parenting asses can reap what you have sown. now u can be parents and shelter ur offspring while they regroup cuz if they don't a depression is the least of your worries. i say let's go cowboy i'll be happy to kill ur kids and take their gold and supplies...yup cowboys and indians which r u?
ReplyDelete8:04,
ReplyDeleteOkay. Enough already.
Why don't we excuse every silly thing away?
The young woman has a brain. Why didn't she use it? Obviously she's not qualified to be a psychiatrist because she can't think that far into the future.
There are so many monkeys like her.
We are not oppressed by evil people, but by the innumerable dimwits who want every right under the Sun without the responsibility.
Oh I picked the wrong career and now I'm stuck with the bill. So? What do you want me to do? Cry for you? You're a fool. Now pay up and learn from your mistake.
8:04 --- Take your meds!
ReplyDeletei read your article it was great post i must say,very useful and informative.personal bankruptcy is becoming an increasingly popular way to end the battle with debt. However, before you begin the process you need to have a full understanding of the ins and outs of bankruptcy.Most of the people claim the bankruptcy because they have more debt than they can ever hope to repay.And because they do not want to be taken this to court. And you have no way to ever repay your debts,then bankruptcy may be an good option for any one.
ReplyDeleteDeclaring bankruptcy is typically a complicated issue. Where must one begin? What forms of bankruptcy should a individual apply for? How will the current bankruptcy regulations affect a person's case? What will probably be the effects of a bankruptcy declaring? You only have one opportunity, so it's really crucial that you've it perfect at the first try. This truly is why choosing the suitable bankruptcy lawyers is needed.
ReplyDeleteI personally feel a bit ashamed as you people judge the young lady for her own faults. There are things that some of us can't control. I'm 25 and left my parents house at 17, why you may ask? Because of a bastard of a stepfather, but I went to college, no parent to bail me out.
ReplyDeleteIt's understandable the anger you older folk feel, but honestly the way things are shown to us while we are making our college decisions is what brings about our downfall. We were told in our senior years of high school that if you didn't go to a prestigious college you weren't going to make money to survive. That community colleges would land you a job in nowheresville, and in fact most dont even know that part of "financial aid" is in fact partially a loan.
Another thing is no one foresees failure. I had a great job, wonderful apartment loving fiancee and now I have nothing but my husband and my miracle child on the way... 2% chance of ever having a baby I wasn't expecting to be expecting. My husband lost his job due to the economy and I lost mine as well... We have loans debts living in a room and you people are sitting there blaming poor decisions. Well guess what not everyone sees into the future.