The Fragile Middle Class: Americans in Debt

This is not a "sky is falling" or alarmist book. It's not a negative gloom-and-doom book. It does focus on an unwanted event we consider negative, and it does occur in millions of peoples' lives. Da Big "B." It could happen to you, it could happen to me. Authors Sullivan, Warren, and Westbrook have decades of experience in the industry and provide one of the most detailed and accurate pictures of the people and circumstances within it. In addition to statistics and research, tables, and graphs, the authors conducted detailed surveys of 2,452 people and provided case histories of folks that filed for bankruptcy in the 1990s. They come from all income and occupational levels, and from all geographical areas of the country. Just like you and me. It only takes a hiccup. Keep your eye out for the legislation that will be coming forward. Although it would be unpleasant, bankruptcy is not the end of the world, by any means. There are worse things that can happen in life.The "Fragile Middle Class" has non-biased an informative information on....us. What is the reality behind the so-called middle class? While millions of individuals and families are members of this club, and we have a definition of what qualifies people as being part of it, what is the financial health of the American middle class today in 2003? Real income is still declining, even after the economic boom of the 1990s. (This was a pseudo economic boom). Personal debt is at record levels. If truthful accounting and honest financial disclosures are conducted, being middle class means living paycheck to paycheck, on the brink bankruptcy, due to even a minor financial hiccup: divorce, a staggering medical bill due to illness or accident, or loss of a job. The authors' introduce the new concept called "skidding," which is when a person changes jobs, which results in lower pay, and therefore less income coming in. And they discuss the record number of people who've recently gone bankrupt. This book is about those, who are most of us, that teeter on the edge. First, debt is essential to living in our modern economy, and when used properly is good for us, and benefits the economy. We can't now, and have never been able to pay cash for our home, or a new or used car. When people invest in real estate or a business, they borrow capital. Having leverage is actually better. However, total Debt ratio is the largest it's ever been, combined with stagnant and declining wages. 2/3 of the American economy is dependent on consumer spending, completely dependent upon people spending their on money on--everything. One example, out of thousands, is the recent public "begging campaign" from politicians and high-profile business spin doctors in New York, imploring people to "come to New York and spend money," to revive the economy. When there is a slight dip in consumer confidence we hear about it from the media, because it's considered so vital to the U.S. economy. This book uses

As a 20-year bankruptcy practitioner,I believe this book is a "must read" for any one whose income is less than seven-figure. It could happen to you! The factors leading to bankruptcy are varied, but have a common thread: an over extension of credit and a "hiccup" in life that makes it unduly burdensome or impossible to shoulder the debt. The seductive siren call of "For everything else there is MasterCard" and "VISA, everywhere you want to be" or "nothing down, no interest, and no payments for a year" is for many irresistible. Credit cards can be very convenient but also, as the authors point out, hazardous to one's economic health. Credit cards should come with a warning similar to the Surgeon General's warning for tobacco. While the explosion in bankruptcy filings during the past decade is fairly spread over the various age groups, it is the under 30 group that is the most vulnerable in the future. With almost limitless student loan availablility and multiple multi-purpose credit cards, i.e., VISA and MasterCard (even to high schoolers), the ability to incur indebtedness far beyond any reasonable realistic expectation of ability to repay is pandemic. When a person can leave college saddled with $50,000 or more in student loan obligations and incur an additional $50,000, or more, in "small bite at a time" debt in the span of less than 5 years, it does not take much of a "hiccup" in life to bring the house of cards down. As the authors so well illustrate, consumer finance education and teaching fiscal discipline at the high school level is an absolute must. Those who practice "immediate gratification," like Humpty Dumpty, are headed for a major fall and bankruptcy can not put them back together again.

This book discuss the reasons in the increase number of bankrutptcy filings within the last decade. The '90s was a time of great prosperity. Huge technological changes came by. In many ways our community life seems easier with advance in medicine, transportation, communication and the Internet. But reality is very confusing as you read "The Fragile Middle Class". Real average income decreased. A higher family income was reached due to the fact that, like never before, there was more than one income in the household. Even with this additional income, many families can barely make it. Consumer debt is rising, more so after a divorce, unexpected medical expenses, job instability and the purchase of a home at any cost. American society has experienced a negative income, collectively people are not saving money. Only the richest 20 percent of the American population has had a real income increase during the last two decades. The use of credit was increasingly easier. Meanwhile the industrial sector dealt with inflation reducing operational cost by reducing payroll and resorting to contracting services. The middle class is subject to periods of adjustment and transition. Once a job is lost debts keep pilling up. Unemployment figures not necessarily reflect the dynamic behind job instability. Credit was used to maintain social status with huge amount of interest charged. Even if consumers could stop incurring in new debt and reducings costs, high interest rates keep debts going up. Lately credit has been easily available to "higher risk consumers", people who most likely will not be able to pay their debts. The percentage of divorced persons in bankruptcy is bigger than the percentage of divorced persons in the general population. Of this percentage, women with children confront the most difficulties. Family budget full of debts, unstable jobs and all the other factors mentioned keep homes at risk. Between 1996 and 1998 the American middle class paid off 26 billions in credit cards and consumer debts through home equity mortgages. As an attorney for debtors in bankruptcy for over 25 years I recommend this book to understand middle class income instability and the increase in bankruptcy filings.

This is an important book for women to read. It explores how our seemingly-secure middle class lifestyles may be shattered by a job loss or a serious accident or illness. The authors explain how credit card debt makes families particularly at risk. The most disturbing chapter to me was the description of what happens to women following divorce. The authors show that a divorced woman has a 300% greater chance of filing for bankruptcy than her married sister. Can it be, as the authors say, that a woman's economic success is still largely dependent on marrying--and staying married?This book made me think about social class mobility in a different way. The authors study middle class people on their way down. They show how people with good educations and in decent jobs can have their lives turned upside down by a layoff, a job transfer, an illness, an accident, or a divorce. According to the authors, more than a million families each year are going to the bankruptcy courts for protection.The book is well-written, lively and sometimes witty. A good, but disturbing, read.

This book is a follow-up to the authors' classic study of the bankruptcy issue As We Forgive Our Debtors. In this book, the authors look at the reasons debtors file for bankruptcy. Among the many interesting findings, the authors note the increased numbers of homeowners filing for bankruptcy. Not only are they filing because of other huge debts, but often they are resorting to bankruptcy BECAUSE of homeownership. Some resort to Chapter 13 in order to get caught up on mortgage payments, while others try desperately to hang on when it might have been more advisable to surrender the house. In short, homeownership is not seen so much as an asset as a liability.The authors devote much of their book to the increased amount of credit card debt consumers in general and bankrupt debtors in particular carry and why this has happened. This is especially timely, as Congress seems well on the way of passing so-called bankruptcy "reform" that would benefit credit card companies to the detriment of debtors by forcing more of the latter into Chapter 13 or denying them bankruptcy access altogether.This is a very readable, very well-researched book by three of the top experts on bankruptcy law in the United States.