Stratford Bankruptcy Blog

Buying a home is an accomplishment that homeowners should be proud of, but it is also an enormous undertaking. Houses require regular maintenance and upkeep, and since nothing in life is perfect, most homeowners in Connecticut can expect to deal with unexpected repairs at least once. When faced with these costs, homeowners usually end up taking on at least some consumer debt, which could ultimately lead toward bankruptcy.

Mortgages are not considered consumer debt, which are things like credit cards, medical bills and student loans. However, mortgages frequently contribute to consumer debt. In a survey by Discover, 14% of respondents said that home repairs were their biggest sources of consumer debt. Considering that 60% of adults in America say their debt is a burden, this only adds to the stress felt by the 12.4% who already say their mortgages are the biggest burden.

Adults in Connecticut probably assume that they understand the basics of their finances. Many might even think they know quite a bit on the subject. Unfortunately, a lot of people understand far less about finances than they realize. A general lack of financial literacy is pushing people into difficult money situations where bankruptcy is frequently the best -- or only -- option.

Financial literacy is an important life skill, but only 57% of adults in America can pass even the most basic test on the subject. In fact, 13 other countries beat the United States when it comes to how many adults have financial literacy. Part of the problem is that most adults were never given the opportunity to learn about managing finances before being thrust into doing it all on their own. Attempts at learning later in life are not always effective either, especially since many wait until they are in difficult situations to do so.

For millennials, it might just feel as if there are opportunities for new credit cards around every corner. This is unfortunately not that far off from reality, so adults regularly use credit cards for making large and even everyday purchases. But credit card debt can spiral out of control much more quickly than most people realize. By the time someone realizes the situation has gotten out of control, bankruptcy could be the best option.

Credit card companies try to draw in millennials a couple different ways. One example is mailing out applications to Connecticut residents that do not exactly paint a full picture, like just how high interest rates get when introductory rates expire. Interest rates of as much as 25% are not that uncommon. Even when that information is out there, these companies often pile on incentives to encourage spending.

Owning a home is just one part of the American dream, but it often turns out to be more expensive than prospective homeowners in Connecticut expect. Finding a lender who is willing to offer fairly large mortgages might feel like the perfect solution to an expensive housing market. But securing a jumbo mortgage can actually cause more problems than it solves. As the past has already shown, jumbo mortgages play a surprisingly large role in bankruptcy filings.

When a property is too expensive for a typical home loan, a lender might offer a jumbo mortgage that ranges in value from the $400,000s to millions of dollars. Securing this type of mortgage is not that hard, either. Even though the last recession was not that long ago, one lender is offering $1 million mortgages to people with credit scores of 760 or higher. All they have to do is pull together a 10% downpayment. Borrowers who have credit scores of only 640 can get even larger mortgages through a different lender, often as much as $3 million.