More Americans Defaulting on Loans as Poverty Rate Remains Unchanged

With the stock market and real estate market enjoying gains, economists and experts have indicated the economy is recovering or has even recovered from the Great Recession.  The recovery, however, is a tepid one and is often referred to as a jobless recovery because few good jobs have been created and most of the new work opportunities are part time or low-wage. 

Any bankruptcy lawyer in South Carolina knows that many Americans are still facing financial struggles, living paycheck to paycheck or even living below the poverty level. Unfortunately, data shows both that the poverty rate has remained unchanged and that Americans are defaulting on their loans more often.  Those who are unable to pay their bills should seek help and be proactive in resolving their debt problems, rather than coping with collection calls and aggressive collection efforts.

Defaults Increase & Poverty Rates Remain Unchanged

NBC News summarizes some disturbing statistics on the challenges many Americans face.  The economic data indicates:

  • The number of Americans who are living at or below the poverty line remained unchanged at 15 percent in 2012 for the second year in a row.  The poverty threshold for a family of four with two kids under age 18 was $23,283.
  • In 2012, there were 46.5 million Americans living in poverty, which is 2.5 percentage points higher than in 2007 and 9 percent below the 1999 income peak.
  • The poverty rate in 2012 was 27.2 percent among blacks and 25.6 percent among Hispanics, while just 9.7 percent of non-Hispanic whites were living in poverty.
  • The median income for full-time working women in 2012 was $37,791. For men, the median income was $49,398 for those working full time.

Because many families are living in poverty and there have not been significant increases in median income even as gas and other necessities have become more expensive, it should come as no surprise that Americans are defaulting on their loans more often. As Yahoo reports:

  • The default rate among all credit products was 1.35 percent in July, up from a national composite default rate of 1.34 percent in June.
  • In July, 3.22 percent of bank cards had defaults.
  • The default rate on auto loans increased from one percent in June to 1.03 percent in July.
  • The default rate on first mortgages increased from 1.23 percent in June to 1.25 percent in July.

This data shows that the default rates are down as compared to last year but that Americans are still defaulting more frequently. With MSN reporting that debt collectors often engage in abusive practices and that 164,361 complaints were made to the Federal Trade Commission about debt collectors in 2011, families who are in default may be coping with harassing telephone calls and other aggressive debt collection techniques.  There are better answers than dealing with these debt collectors, including debt settlement and bankruptcy, and those who are struggling financially should get help from an experienced professional who can explain their options. Contrary to what many believe, bankruptcy may actually help your credit score if you are in default on many of your debts, and it can also allow you a way to stop collection efforts and get a financial fresh start.

If you are in default a bankruptcy lawyer in South Carolina can help. Contact Matthews & Megna today at 877-253-7705.


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