It seems that the federal government is hedging many of their economic recovery plans on helping people to purchase homes and stay in their existing homes. A good deal of stimulus money has been set aside for helping home owners modify their existing mortgages or first time buyers get into homes; but the rising rates of personal bankruptcy is rocking the boat on home buying and mortgage paying.
Personal bankruptcy has increased this month and we are right on track to have the highest levels of personal bankruptcy in four years when the rules of Chapter 7 bankruptcy changed. This problem is compounded by a large increase in business bankruptcies as well. The American Bankruptcy Institute reports that the total number of bankruptcies in America have risen by 30% over last year; this is a massive blow to the recovering economy as people who have no money to spend are hard pressed to spend anything on stimulating the economy with purchasing.
Needless to say, the more people who file for bankruptcy, the more prospective buyers who will be taken out of the pool of prospective home buyers; these people will join all the other Americans who can’t afford to splurge on a home right now due to their current financial turbulence. While unemployment rates are still very high, this dwindling pool isn’t likely to see a resurgence either; the percent of Americans who are unemployed right now is the highest in over 25 years and may keep climbing.
It may be wiser in the long run for the “powers that be” to focus on economic support in areas that are more directed to the largest amount of the population, those who fall beneath the level of income that could afford to buy a house in the first place. The administration may well be on the right track already with their extension of unemployment benefits but it is likely going to not help people who have had their benefits expire previously.
Hopefully there are some solutions that can be found which will assist people across the country to ride out this tumultuous time with their human dignity relatively intact without creating huge amounts of debt or taxes to deal with later. The next few months will hopefully show some signs of economic upturn beginning, as a little hope can go a long way in the struggle out of this recession.
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