Millions of American families in deep debt

Though the economy is now generally considered to be in a state of repair and many consumers are once again getting their personal finances back on track after struggling mightily during the recession, millions more have not been so lucky, and may soon require credit help.

About one in every five households across the country still owe more on their non-collateralized debts – such as credit cards, medical bills, education loans and so forth – than they have in savings and liquid assets, according to a new study from the University of Michigan. This means that, much like those who are struggling to make mortgage payments, they are financially underwater. Further, another 1.7 percent of consumers surveyed said they were “very or somewhat likely” to fall behind on their mortgage payments in the near future, though this is an improvement from the 1.9 percent observed in 2009.

“Some families have not been able to make substantial headway,” said Frank Stafford, an economist at the University of Michigan Institute for Social Research, who co-authored the report with researchers Bing Chen and Robert Schoeni. “Even if they’re not underwater with their mortgages, they are struggling to save money and reduce their debts.”

In all, about 3.5 percent of the families surveyed had a home and were behind on their mortgage payments, in either or both 2009 and 2011, accounting for about 4.1 million households nationally, the report said. And between those two years, the number of families with no savings and no other liquid assets spiked to 23.4 percent, up from 2009’s total of just 18.5 percent. However, the amount of money being saved nationwide has increased, but this has largely been done by more affluent families. The only area in which financial liquidity increased between 2009 and 2011 is among families with more than $50,000 in savings and other assets.

Non-collateralized debt particularly problematic

The proportion of consumers who had $30,000 or more in outstanding credit card debt and other non-collateralized lines of credit rose somewhat between 2009 and 2011, climbing to 10 percent from 8.5 percent, the report said. Meanwhile, the amount of people who said they had no such debt slipped, though far less significantly, falling to 47.4 percent from 48 percent. The study found that these shifts were likely the result of increased education borrowing among consumers, as well as small jumps in inflation.

During the recent recession, many consumers ran into significant financial trouble through no fault of their own. Millions lost their jobs and were required to rely heavily on their credit cards to make ends meet, particularly when unemployment insurance payouts ran out. Now, with the economy improving, many are looking to get their finances in order, and may be looking at how to fix their credit as well. There are numerous credit repair options available to consumers, and often, a good first step is researching ways to go about doing so.

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