Bankruptcy

Credit Woes

By J. Michael McBride

The subprime mortgage troubles are now spreading to customers who rely on credit. The consumer debt has double in the past decade and reached an "all-time high of $2.55 trillion" in December 2007. Consumers were using their houses as piggybanks with home equity loans and now they are struggling. They are charging everyday expenses including gasoline, groceries and basic home utilities. The areas of credit that consumer are struggling with are credit cards and auto loans.

Credit Cards: "Card balances written off as uncollectible by banks have jumped 24 percent, and late payments are up 16 percent from a year ago. Credit card companies are also seeing a rise in delinquencies, and while they are not near historically high levels, they are following a bad trend. In November, they [cardholders] paid back, on average, 17.9 percent of their credit card debts -- about 3 percent lower than the previous November rate of 18.5 percent. The report also revealed that the number of people more than 30 days late on their credit card payments in November rose from 3.89 percent a year ago, to 4.28 percent, the highest it's been since March 2005. It was the fifth consecutive month-to-month increase."

Auto Loans: "The number of people more than 60 days late on their car payments has spiked to a 10-year high. The number of repossessions soured last year by 10 percent and is expected to rise by the same amount this year. A decade ago, it was rare for loans to last longer than five years; now, it is common for them to go for seven or eight years. While these products lower monthly payments, they also dramatically increase the amount of interest a borrower pays and raise the chance they will default. Delinquencies amount borrowers with poor credit, who favor this loan type, exceeded 4 percent last month. For borrowers with good credit, who tend to use traditional loans, the rate hit 0.8 percent, also the highest in a decade."

You can read the entire article at: http://www.washingtonpost.com/wp-dyn/content/article/2008/02/17/AR2008021702487_pf.html

Chandra

Full post as published by Texas Lawyer Blog on February 21, 2008 (boomark / email).