High mortgage rates leave public facing difficult decisions
The astronomical price of insurance, combined with ever increasing mortgage rates, is having a huge effect on citizens of St. Charles Parish, leading to large upswing in the amount of bankruptcies in the area.
Throughout 2006, the Eastern District of Louisiana had 1,767 bankruptcy filings, and that number was surpassed easily in 2007 with 2,006 cases already filed in the first three quarters of that year. The fourth quarter totals have not yet been released.
The increase comes despite a new bankruptcy law in 2005 that actually made it harder to file. Before 2005, most filers could choose the type of bankruptcy that seemed best for them. This would either be Chapter 7, which is liquidation, or Chapter 13, which is repayment. With the new law, a person’s monthly income is measured against the monthly income of a similar household in their state. If their income is less than or equal to the median, they can file for Chapter 7. If not, they must past a means test, which determines whether or not that person has enough disposable income to make payments on a Chapter 13 plan.
“Right after they changed the law, I was filing one bankruptcy a year,” Attorney David Moyer, who handles bankruptcies in both St. Charles Parish and New Orleans, said. “Now, I have four or five people calling me a week. About 80 percent of those calls come from people in St. Charles Parish.”
Moyer says that though bankruptcies are increasing across the nation, Louisiana is more at risk because of the rising insurance rates that Hurricane Katrina forced upon the area.
“What I’m seeing is that folks are getting in over their heads in regards to their homes,” Moyer said. “Insurance and mortgage rates have jumped so much that people are using credit cards more and they eventually reach a breaking point.”
Moyer says that anyone facing bankruptcy may need to look into moving into a smaller home to avoid filing.
Some other steps that can be taken to avoid bankruptcy are:
– Talk to your bank and find out if you can consolidate all your debts into one payment. That can make your monthly bills more manageable.
– Make a list of your debts and write down the phone number to each of your creditors. You may be able to avoid filing bankruptcy if you are able to make payment arrangements with each of your creditors.
– Be honest with your creditors about your situation because a debt repayment plan will only work if you are realistic about what you can afford to pay each month.
– Cut back on extras like eating out, entertainment and shopping.
– Cut up your credit cards. They contribute to bankruptcy because they allow you to spend frivolously.
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