Consumers file for bankruptcy in higher numbers

The Dallas Morning News reports: "The economy's deep troubles are pushing a growing number of struggling consumers into bankruptcy. Often they have much more debt than those who filed in previous downturns."

"Dropping home values, shrinking incomes and the near disappearance of credit have proved a strong mixture. While all the usual reasons that borrowers seek bankruptcy – job loss, medical bills, divorce – play significant roles, new forces are changing who can ride out the tough times and who cannot."

"The number of personal bankruptcy filings jumped nearly 8 percent in October from September, after moving steadily upward for the last two years, said Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company."

"Filings totaled 108,595, surpassing 100,000 for the first time since a law that made it more difficult to file for bankruptcy took effect in 2005. That's an average of 4,936 bankruptcies filed each business day last month, up nearly 34 percent from October 2007."

Paulson Credit-Card Bailout Draws Growing Criticism

Time Magazine reports on plans to bailout credit card issuers: "Treasury Secretary Henry Paulson's latest plan for the $700 billion bailout fund has many economists responding like Seinfeld's Soup Nazi, "Next!" They say the idea of using funds approved by Congress in early October to stimulate credit card and auto lending is ill advised and unnecessary."

"'I don't think providing more leverage to consumers is best for our economy in the long-term,' says Adam Lerrick, who is a visiting scholar the conservative-leaning Washington-based think tank American Enterprise Institute. 'The consensus is that consumers have borrowed too much over the past 10 years, so I don't get why putting them further into debt is the answer.'"

"What's more, industry watchers say credit card and auto lending has actually held up quite well despite the credit crunch. According to market research firm Synovate, the average consumer probably has a higher limit and therefore can spend more on their credit card than they could a year ago. "

Record High Consumer Debt

Debt can get in the way of your retirement

The Motley Fool reports, "If escaping debt were easy, no one would ever file for bankruptcy. Even worse than recognizing the opportunity cost of debt, though, is the feeling that you're just treading water."

"If your debt is significant, and the terms are onerous, you can easily wind up paying two or three times as much as you borrowed in the first place. That kind of debt is hard to overcome."

"You have two options: Spend less, or earn more to increase the amount of money you can put towards paying down your debt. Disciplined savings strategies, living below your means, and taking on extra work are all time-honored ways to pay it off and start saving for retirement."

"As you pursue those strategies, consider as well that all debt is not created equal. Consumer debt, unlike mortgages and student loans, commonly boasts interest rates much higher than you're likely to earn through investments. Even worse, it doesn't provide any tax benefits."

"If you have credit card debt, and you're saving for retirement above and beyond that required for an employer match, consider spending that money on paying down the debt. In the end, your bottom line will grow that much faster."

Bankruptcy filings in Ariz. up 60% from last year

The East Valley Tribune reports, "Thousands of Arizonans facing financial crisis began 2008 by filing bankruptcy. The number of Arizonans lining up to file bankruptcy was up more than 60 percent through February, compared to the first two months of last year, according to the U.S. Bankruptcy Court of Arizona. That number is 74 percent in the Valley."

"Statewide, bankruptcy filings totaled 2,041 through February, up from 1,252 through February 2007. In the Valley, filings totaled 1,504, up from 865. Most of the filings represent consumers seeking Chapter 7 liquidation."

"'I think persistently high fuel cost is not helping the situation,' said Anthony Clark, a Valley-based bankruptcy attorney. 'I think the trend might reflect homeowners who have exhausted all other options and alternatives, and finally asked about bankruptcy. I think you’re seeing people who made a decision that they’re going to stay in their houses and they’ve run out of options, so now they are coming to the bankruptcy arena to get some relief as an option.'"

Video: Credit Card and College Students

Foreclosure crisis has ripple effect

USA Today reports, "The mortgage foreclosure crisis has caused a drop in cities' revenues, a spike in crime, more homelessness and an increase in vacant properties, a survey of elected local officials out today shows."

"About two-thirds of 211 officials surveyed by the National League of Cities reported an increase in foreclosures in their cities in the past year, according to the online and e-mail questionnaire. A third of them reported a drop in revenues and an increase in abandoned and vacant properties and urban blight."

"'There's a reduction in revenues at the same time that more services are needed,' says Cynthia McCollum, president of the National League of Cities and councilwoman in Madison, Ala., a suburb of Huntsville. 'Because of foreclosures, people are stealing, crime is on the rise and we don't have more money for cops on the street.'"

Drive Free, Retire Rich

Dave Ramsey, long-time anti-debt advocate, has put together a fantastic video that explains how one can save hundreds of thousands on paying cash for cars rather than financing them.

This is a much watch. Use the following and click where it says video:

Dave's Ramsey Drive Free, Retire Rich Video

Many more going bankrupt in Massachusetts

The Boston Globe reports, "Bankruptcy filings have surged 22 percent in Massachusetts this year, as more people are unable to afford their rising mortgage payments or refinance their homes to pay bills, according to court filings and bankruptcy attorneys."

"Massachusetts filings in US Bankruptcy Court increased to 2,493 between Jan. 1 and March 5, from 2,039 during the same period a year ago. Filings were also up sharply for all of 2007 compared with the previous year, despite a 2005 law change that was intended to reduce the number of bankruptcies."

"Lawyers, trustees, and other bankruptcy specialists said the housing crisis is the single biggest reason that personal bankruptcy filings are rising rapidly. They said homeowners with subprime and adjustable-rate mortgages who cannot make their higher payments are resorting to bankruptcy. A decline in housing values has also limited the financial flexibility of homeowners who once were able to tap their home equity to pay off car loans or mounting credit card bills."