This is the season for giving, and I think the best gift I can give you is peace of mind, or at least suggest some resources that can help you find it. First, let’s talk about today’s tough financial realities, put them in perspective, and then take a look at some resources you can use and share with others.
In America, and world-wide, the recession is hurting consumers. Let’s call consumers what we really are – hard-working, tax-paying citizens, trying all our lives to give our children more education to prepare themselves to thrive in the world and lead productive, caring lives. We don’t just “consume” – but this recession is consuming us. It has consumed more than 10% of our jobs, large chunks of the equity we thought we had in our homes, and no small part of our peace of mind, even if we still have jobs and mortgages we can afford. Scary times affect our health, too, with anxiety weakening our immune systems and making us vulnerable to illnesses that require medical attention. How does that relate to bankruptcy? A recent study suggests that more than 60 percent of people declaring personal bankruptcy are driven into it by medical bills.
As more of us are being driven into bankruptcy, that creates a critical “financial health” issue. CNN Money reports that Chapter 7 bankruptcies have increased markedly in 2009, reaching a four-year high because of rising unemployment and the housing crisis. The American Bankruptcy Institute (ABI) reported that personal bankruptcies in the first nine months of 2009 were 35% higher than the same period in 2008. The ABI’s raw numbers are 1,046,449 consumer bankruptcies in January-September, 2009, based on data from the National Bankruptcy Research Center. People claiming bankruptcy look just like us – “more individuals earning $40,000 or more per year and those with associate or bachelor degrees to file for bankruptcy in 2008 than in years past, according to the annual Consumer Bankruptcy Demographic Report released by the Institute for Financial Literacy in June, and the organization expects the trend to continue.” Leslie Linfield, executive director of the Institute described bankruptcy filers as “middle class” and “overextended on their credit” (a combination of credit card and mortgage debt), and predicted that unemployment will continue to drive bankruptcy claims higher until they “peak in late 2010 or 2011 before leveling off.”
Maureen Thompson, legislative director for the National Association of Consumer Bankruptcy Attorneys in Washington, observed that “People end up in a bankruptcy attorney’s office as a last resort. …They are people who have been laid off, have tried to hang on with their savings thinking they could weather the storm, and are doing whatever they can to pay off their debt,” until they face legal action from creditors. The threat of foreclosure on your home is one of those legal actions, and the third quarter of 2009 was the worst foreclosure quarter on record.
Unemployment at today’s level of over 10% effects everyone. If you have job, and it’s great that nearly 90% of us still do, you probably either know someone or have a family member who has been laid off. Besides the personal pain associated with each person’s job loss, the worst news is that the “long-term unemployed” category (27 weeks or more) is now the largest category. As educators, we realize that long-term unemployment reflects likely permanent job losses – types of skills that have been outsourced overseas or that have been replaced by new, different skills – so many of the 8,000,000 jobs lost since the recession started are gone forever. There are on average six applicants for every job opening, and several of those probably need to upgrade their skills to qualify for it. That’s an opportunity for educators, but not the subject of this discussion.
Another indicator of financial distress related to bankruptcy is the rise in food stamp use. Over 35,800,000 people, 11 percent of our entire population, are receiving government assistance through the SNAP (food stamp) program
Knowledge, an Antidote to Fear
Having acknowledged that many aspects of this recession legitimately trigger worry, let’s focus on how our friends, families, co-workers and employees can know more and, using what they know, do better. We know that information and purposeful action are the steps on which we walk through and past our fears.
Information resources that can help people address their financial worries include those embedded above, repeated here, and others:
- American Bankruptcy Institute – This site includes a Consumer Bankruptcy Center with links to pages on answers to common questions, “Should I File for Bankruptcy?” and pro-bono resources for legal steps.
- Association of Independent Consumer Credit Counseling Agencies – Here, you can begin finding a local counseling agency.
- Bankrate.com Debt Management and Financial Literacy – From this page, you can also find links to debt management calculators, dealing with old debt, and the answers to various “How do I …?” questions
- Consumer Credit Counseling Services – This site contains pages with articles on financial crisis topics, financial worksheets, planning tools, online counseling, and informative blog posts.
- Consumer Federation of America – The Consumer Information page contains links to understanding credit and your credit score, savings strategies, debt management, and other consumer issues relating to general safety as well as financial prudence.
- Institute for Financial Literacy – The Bankruptcy Related Services page is a portal to information on bankruptcy and the services people may need for filing.
- National Association of Consumer Bankruptcy Attorneys – The home page displays lead-ins and links to news articles you may find interesting and a search capability for attorneys near the address you enter.
- National Bankruptcy Research Center – This site for financial analysis professionals allows you to access limited information about most recent studies, such as the Credit Counseling Value Study and the November 2009 Bankruptcy Filings Report.
- National Foundation of Credit Counseling – The home page is a portal for finding a credit counselor, bankruptcy education, housing advice, and general financial education, including a list of publication resources in Spanish as well as English.
Of course, if you’re an employer, a human resources or workforce development professional, or the leader of a community organization, our Alaris™ financial literacy curricula can help your team gain skills and peace of mind in dealing with credit card debt, budgeting (including increasing thrift for greater savings), and identity theft.
What do you think? Please share your comments.