The American way of default: James Saft | Special Coverage | Reuters
The way Americans go bust has changed fundamentally, and the implications for financial markets are both important and negative.
In the more innocent days before the debt bubble popped, vulnerable borrowers tended to do everything they could to hang on to their houses. The result was that they'd stop paying off their credit cards first, the car loan second and only last would they default on their mortgage.
But for many Americans in the credit bust, especially an overburdened minority, that set of priorities has been turned upside down. [...] Subprime house loans started to go bad first, followed with a lag by subprime auto loans and now credit cards. Federal Reserve data show credit card debt more than 30 days delinquent increased sharply in the second half of 2007, by about 14 percent to 4.55 percent, the most since 2003.
In contrast, in the mid 1990s and during the slowdown in the early part of this decade credit card delinquencies rose before mortgage arrears, according to Federal Reserve data.
He goes on to say that as the subprime tsunami crests and subsides for the last time (and this time we really mean it), credit-card debt is going to be the next crisis.
Martha, Gumby, other lawyers, what's the legal avocation's assessment of the effects of the new bankruptcy laws on home & credit-card debt? Did the tighter bankruptcy laws arrive "just in time", or are they making a nasty situation even worse?