You are not alone
A record number of Americans are fighting a losing battle against rising debt. You know this because you are living it. From 1996 to 2006, housing costs increased 64.9%, against wage increases of 35.8% - almost double the rate. Medical costs have outrun income gains by 57%. This has affected you, your neighbors, and just about everyone else you know.

Stretched Thin: The Impact of Rising Housing Expenses on America's Owners and Renters Prepared and presented by the Center for Housing Policy View complete article

If you are behind on your mortgage, you are not alone - as of Fall 2009, 1 out of every 40 Shawnee County households are over three months late on their mortgage. If you are behind on your credit cards, you are not alone - over 2.7% of Wyandotte County households are 60 days or more late on their credit cards. And the numbers continue to increase.

Mortgage Delinquency Rate 90+ Days
(Darker shading indicates higher percentage.)

Source: Credit reporting agency, TransUnion LLC'sTrend Data database.

Nationally, the numbers are far worse. One in every nine homes is vacant. The national unemployment rate is over 9.7 percent. These unfortunate families are on the fast track to losing their homes. Kansas has been spared the worst of the financial meltdown, but Kansas families are still hurting, and there is more misery to come.

What can you do?
Bankruptcy is alive and well. We are filing more cases than ever. In June 2009, our office filed on over $1.1 million in dischargeable unsecured debt - financial burdens that will dry up and blow away once our clients get their discharge. Bankruptcy reform made the process more complicated and technical, but it still does what Congress designed it to do: get families out from under debt.

Bankruptcy is still the most efficient way to get back on financial track for most of the people we see. However, we want to make sure you know all your options before you file. Here are some choices.

What to do:

Talk to a counselor about debt management:
Take control of your finances by getting rid of debt. First, speak to a local certified consumer credit counselor. We refer people to US Trustee approved agencies such as Housing and Credit Counseling of Topeka and Lawrence (HCCI). They will look at options other than bankruptcy.

Agencies like HCCI will mainly look at whether you have the extra cash to pay off your debt through a Debt Management Plan. In exchange for an interest reduction on your credit card accounts, you agree to make monthly payments to your creditors through your counselor. The monthly payment will likely be about 3.5% to 4% of your debt balance. As an example, if you owe $45,000 in credit card debt, you will need to pay from $1,575 to $1,800 as a monthly payment. If you cannot afford a payment this high, you need to seriously consider filing for bankruptcy.

Look at mortgage modification programs:
If you are behind on your mortgage, you may be interested in entering into a loan modification program. The creditor can reduce your interest rate, extend the life of the mortgage, or defer mortgage arrears to let you catch up.

You may be familiar with the Making Homes Affordable plan - this plan, put into effect in late 2008, can help you refinance your mortgage, or lower the interest and payments to make your mortgage more affordable. You can find more information at www.makinghomeaffordable.gov.

These programs are new, and there is still a great deal of uncertainty about how they will be implemented. You also need to be careful to avoid the many scammers and con artists who are capitalizing on this uncertainty. The Federal Trade Commission has issued a publication explaining how the various foreclosure scams work - you can access it here. We recommend you work through a HUD certified counselor if you want to try a loan modification. HCCI can help you through the loan modification process.

What not to do:

Do not borrow against your house or retirement account until you talk to us
As you grapple with your finances, you may be tempted to take a second mortgage on your home in order to pay off your consumer debt. We discourage people from doing this. The subprime loan market was driven in part by families who entered into risky "equity-out" lines of credit. A shocking 16.4% of such subprime mortgage loans were 60+ days delinquent by the end of 2008. These unfortunate families are on the fast track to losing their homes.

The reason for the delinquency is that families rarely get the financial relief they expect from refinancing. They run up their card balances yet again, and then start buckling under the weight of the new mortgage payment combined with the reborn consumer debt.

Similarly, liquidating a retirement account is usually a bad idea. The tax consequences can wipe out any benefit you may receive. We often see families who have squandered their future retirement, only to be faced with tax penalties they cannot address. This is particularly tragic when the family loses their nest egg, and incurs non-dischargeable tax debt, in order to pay off debts easily discharged in bankruptcy.

When you are ready:

Browse our website
We have put together a few information packets you might find helpful - you can find them in the Resources section. You may also want to look at The Process Begins With a Phone Call for an overview of what to expect.

Give us a call
When you are ready, call us. We will set a free, no-obligation appointment to go over your finances and see whether bankruptcy will help.