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Thread: Here come the credit card defaults!

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    God/dess Deogol's Avatar
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    Default Here come the credit card defaults!

    Application of the concept "credit exhaustion" to reality.



    Credit-card defaults on rise in US

    By Saskia Scholtes in New York
    Published: August 27 2007 19:02 | Last updated: August 27 2007 19:02

    US consumers are defaulting on credit-card payments at a significantly higher rate than last year, raising the prospect of problems in the stricken US subprime mortgage market spreading to other types of consumer debt.

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    Featured Member lunchbox's Avatar
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    Default Re: Here come the credit card defaults!

    http://www.foxnews.com/story/0,2933,294912,00.html

    So it took massive amounts of new household debt that probably will probably never be paid off to fractionally lower the number of people at and below the poverty level.

    (I thought this was a good tie in, I didn't want to start a new thread)

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    Default Re: Here come the credit card defaults!

    ^^^ hmmm, by the AP and other mainstream news stories on the latest Census Bureau 'poverty' numbers, the news sounds pretty grim. However, what all of these stories leave out is explaining exactly what the 'official poverty level' means. In essence, the 'official poverty level' has nothing to do with actual poverty, and everything to do with eligibility for social welfare benefits ...



    (snip)" If being “poor” means (as Edwards claims it does) a lack of nutritious food, adequate warm housing, and clothing for a family, then very few of America’s 37 million official “poor” people can be regarded as actually poor. Some material hardship does exist in the United States, but, in reality, it is quite restricted in scope and severity.

    The following are facts about persons defined as “poor” by the Census Bureau, taken from a variety of government reports:

    46 percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.

    80 percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.

    Only six percent of poor households are overcrowded; two thirds have more than two rooms per person.

    The typical poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)

    Nearly three quarters of poor households own a car; 31 percent own two or more cars.

    97 percent of poor households have a color television; over half own two or more color televisions.

    78 percent have a VCR or DVD player.

    62 percent have cable or satellite TV reception.

    89 percent own microwave ovens, more than half have a stereo, and a more than a third have an automatic dishwasher.

    As a group, America’s poor are far from being chronically undernourished. The average consumption of protein, vitamins, and minerals is virtually the same for poor and middle-class children and, in most cases, is well above recommended norms. Poor children actually consume more meat than do higher-income children and have average protein intakes 100-percent above recommended levels. Most poor children today are, in fact, super-nourished and grow up to be, on average, one inch taller and ten pounds heavier than the GIs who stormed the beaches of Normandy in World War II.

    While the poor are generally well-nourished, some poor families do experience temporary food shortages. But, even this condition is relatively rare; 89 percent of the poor report their families have “enough” food to eat, while only two percent say they “often” do not have enough to eat.

    Overall, the typical American defined as poor by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR, or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry, and he had sufficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is far from the popular images of dire poverty conveyed by the press, liberal activists, and politicians."(snip)


    (snip)"There are two main reasons that American children are poor: Their parents don’t work much, and their fathers are absent from the home.

    In both good and bad economic environments, the typical American poor family with children is supported by only 800 hours of work during a year — the equivalent of 16 hours of work per week. If work in each family were raised to 2,000 hours per year — the equivalent of one adult working 40 hours per week throughout the year — nearly 75 percent of poor children would be lifted out of official poverty."(snip)

    ^^^ of course working more than 800 hours per year would also make them ineligible for social welfare benefits !


    (snip)"As noted above, father absence is another major cause of child poverty. Nearly two thirds of poor children reside in single-parent homes; each year, an additional 1.5 million children are born out of wedlock. If poor mothers married the fathers of their children, nearly three quarters of the nation’s impoverished youth would immediately be lifted out of poverty.

    Yet, although work and marriage are reliable ladders out of poverty, the welfare system perversely remains hostile to both. Major programs such as food stamps, public housing, and Medicaid continue to reward idleness and penalize marriage. If welfare could be turned around to encourage work and marriage, the nation’s remaining poverty could be reduced."
    (snip)

    ^^^ here we go again with social welfare benefit eligibility


    (snip)"Another important factor boosting poverty in the U.S. is our broken immigration system which imports hundreds of thousands of additional poor people each year from abroad through both legal and illegal immigration channels. One quarter of all poor persons in the U.S. are now first generation immigrants or the minor children of those immigrants. Roughly one in ten of the persons counted among the poor by Census is either an illegal immigrant or the minor child of an illegal. Immigrants tend to be poor because they have very low education levels. A quarter of legal immigrants and fifty to sixty percent of illegals are high-school dropouts. By contrast, only nine percent of non-immigrant Americans lack a high school degree."(snip)

    ^^^ thus, arguably, the generous efforts by Americans to raise the standard of living for our 'less fortunate neighbors' merely serves as a magnet to attract yet more 'less fortunate neighbors' who expect (and receive) the same assistance i.e. social welfare benefits to subsidize their standard of living.


    Circling back to the fucus of your post, being below the 'official poverty level' also allows for Chapter 7 bankruptcy filings, meaning that people whose earnings are below the 'official poverty level' can run up mountains of debt via credit cards, home equity loans, etc. They can then file for bankruptcy, and walk away clean with all of their debt obligations erased. To make matters even more interesting, legislation is now being discussed in Washington and in many states to pass new laws that would allow homeowners whose incomes are below the 'official poverty level' to received subsidized mortgage refinancing and/or indefinite protection from foreclosure despite the fact that their mortgage has gone into default.

    Also, thanks to Bank of America's policy regarding creation of new accounts (and issuance of new credit cards) based on Matricula Consular ID as proof of identity plus a utility bill as proof of residence plus a TaxID# instead of a SS#, illegal immigrants have an even easier route to avoid paying off credit card debt than filing for bankruptcy. All they need to do is go down to the consulate and get a new Matricula Consular ID with a different first name, and then move to a new address, then file for a new TaxID#. In this way they can not only walk away clean from paying off their 'old' B of A credit card, but they can apply for a 'new' B of A credit card and do it all over again !

    As long as America offers so many advantages of having an income that falls below the 'official poverty level' there will continue to be thousands (if not millions) of Americans who do the math and figure out that they can enjoy just as high of a standard of living by limiting their income and collecting social welfare benefits as they could by working harder, increasing their income, but losing eligibility for social welfare benefits.
    Last edited by Melonie; 08-28-2007 at 03:09 PM.

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    Default Re: Here come the credit card defaults!

    It seems to me that the American poor are poor people with credit cards. So American poor people have toys.

    A poor person in Bangkok, Thailand... is truly poor. With no credit cards. No toys.

    There are people here living in mansions and driving Mercedes, etc that might as well be just as poor (as people officially below poverty level) because they're one month away from bankruptcy and foreclosure. Again, poor people with toys.

    The poverty line is subjectively defined in the US. It's based on a number and a few assets, and not on lifestyle.
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    Default Re: Here come the credit card defaults!

    The poverty line is subjectively defined in the US. It's based on a number and a few assets, and not on lifestyle.
    Absolutely. The US 'poverty line' is actually connected to eligibility thresholds for social welfare benefits. On a lifestyle / standard of living basis this official 'poverty line' bears no reality whatsoever in terms of the global definition of true poverty.

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    Featured Member Vamp's Avatar
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    Default Re: Here come the credit card defaults!

    Quote Originally Posted by paintgoddess View Post
    There are people here living in mansions and driving Mercedes, etc that might as well be just as poor (as people officially below poverty level) because they're one month away from bankruptcy and foreclosure. Again, poor people with toys.

    You make a very good point.

    Working in the financial world it surprises me how many people are like this. They make 4 times the amount I do in one year, but they also owe 20 times the amount I do. They do not own anything out right.

    When I worked at a credit union in Michigan I knew a GM exec. He made a very good living. He had a huge mortgage, two home equity loans, a line of credit, tons of credit cards, two new cars, and all his other bills. He found out his wife had breast cancer. He filed bankruptcy the same year.

    Access to alot of credit almost gives people permission to be irresponsible until it is too late.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Here come the credit card defaults!

    To your point:

    Under the new bankruptcy law, as of October 17, 2005 bankruptcy applicants who wish to file under Chapter 7 must meet certain eligibility requirements under a "means test."

    Under the "means test," if your current monthly income is less than the median income in your state, you can file for bankruptcy under Chapter 7. But if your current monthly income is above the median income in your state, and you can afford to pay $100 per month toward paying off your debt, you cannot file under Chapter 7 and must proceed under Chapter 13 (more on Chapter 13 in the next section). Whether you can afford to pay $100 per month (or $6,000 over a five-year period) is based on a formula that includes your monthly income, your expenses, and the total amount of your debt.

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    God/dess Deogol's Avatar
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    Default Re: Here come the credit card defaults!

    Quote Originally Posted by texasdancer View Post
    To your point:

    Under the new bankruptcy law, as of October 17, 2005 bankruptcy applicants who wish to file under Chapter 7 must meet certain eligibility requirements under a "means test."

    Under the "means test," if your current monthly income is less than the median income in your state, you can file for bankruptcy under Chapter 7. But if your current monthly income is above the median income in your state, and you can afford to pay $100 per month toward paying off your debt, you cannot file under Chapter 7 and must proceed under Chapter 13 (more on Chapter 13 in the next section). Whether you can afford to pay $100 per month (or $6,000 over a five-year period) is based on a formula that includes your monthly income, your expenses, and the total amount of your debt.
    In other words, prepare to pay for that credit party one had for the rest of one's life.

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    Default Re: Here come the credit card defaults!

    When I worked at a credit union in Michigan I knew a GM exec. He made a very good living. He had a huge mortgage, two home equity loans, a line of credit, tons of credit cards, two new cars, and all his other bills. He found out his wife had breast cancer. He filed bankruptcy the same year.
    I used to do some work in a building in downtown Tampa. The firm I was with rented conference space from the building management. We used a conference room in their office on the top floor. One day I showed up to meet clients and couldn't get in. We had no clue why. The office was just closed. Turned out the man who owned the building and management company had a son that was very ill and lost his building. It was very sad. I never knew. I don't think there was anything he necessarily could have done though to prevent it. He needed the money for the medical bills and I assume he mortgaged his building or whatever.

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