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The History of Debt in America - 2000+

Ah, our current economic times. Where are we now? Has the concern about business globalization that was expressed in 1790 gone away? No. Has the concern that consumers are taking on too much debt that was expressed in 1857 gone away? With over $2.1 trillion in outstanding debt, no. Has the way we think about ourselves and our debt changed? Yes. For the better? No. Is it easier than ever to get into debt? Yes. Are there as many ways as ever that are beyond our control to get into debt? Yes.

Are there controls in place that regulate credit reports and debt collection? Yes. Are credit reports accurate? Not completely. Do debt collectors still intimidate and bend the law? Oh yeah.

Is it easier than ever to get out of debt and to get a fresh start? The answer is, fortunately, yes.

While getting into debt may or may not have been due to our own actions getting out of debt is our responsibility. You have options, there are money management tools to use and there is help available. Ultimately how you get out of debt is up to you. Choose a path that fits your finances and suits your personality. Then get busy and make it work. But first let’s take a look at what the new century has brought us.

2001 recession
Following a 15% increase in income during the 1990s boom 2000 brought a change of direction. Falling by 0.4% in 2000 and 2.2% in 2001 income slumped, especially among the bottom 20% of households. Similar to the bursting of the stock market bubble in 1929 the 2001 recession was precipitated by the stock market bubble of the late 1990s bursting in 2000.

The Bankruptcy Abuse Prevention & Consumer Protection Act of 2005
In 2005 the United States Congress took a comprehensive look at bankruptcy. In regards to Chapter 9, for government entities, and Chapter 12, for farms, it took no action. In regards to Chapter 11 where incumbent management retains control of ongoing operations, can obtain new financing, and continue business all while having exclusive rights to propose reorganization plans to creditors theoretically for 120 days but in reality for the duration of the case, Congress did nothing.

However Congress did pass extensive changes designed to make individual filings more expensive, more cumbersome, and less effective.

The Bankruptcy Abuse Prevention & Consumer Protection Act of 2005 requires debtors to receive a briefing from an approved credit counseling agency at least six months before they can file their bankruptcy case. Then they must pass a strict Means Test to determine whether they can have their debts liquidated through Chapter 7 or whether they must enter a repayment plan through Chapter 13. And they must take an approved class on debt management techniques that they have to pay for, before they receive their bankruptcy discharge.

Who’s In Debt Now?
Since you’re reading this probably you’re in debt. You have lots of company.

Boxer Mike Tyson filed for bankruptcy in 2003.

Actor Robert Blake filed for bankruptcy in 2006

More than one million people have filed for bankruptcy in each of the last ten years. Millions more have struggled with debt either by just scraping by or just giving up.

The current amount of consumer debt is over $1.7 trillion dollars.

The Future of Debt
Who are we to look to when planning our economic futures? Perhaps the experts. But perhaps not.

In July 1957 George Humphrey, the U.S. Secretary of the Treasury, said, "I don't see any significant recession or depression in the offing." The recession of 1957 began in August.

In April 1960 Robert A. Anderson, U.S. Secretary of the Treasury was quoted in The Wall Street Journal saying, "1960 promises to be the most prosperous [year] in our history." The recession of 1960 began that month.

As we’ve seen debt can come from a variety of sources. They can be personal, bad money management, bad business decisions, and personal tragedy. And they can just as easily be caused by events a world away. In 1857American grain farmers probably weren’t even aware that the Crimean War was on let alone that it’s end would cause them financial hardship, but it did.

Debt has brought personal destruction and, in the case of William Duer, death in debtors prison. It has also brought redemption and, in the case of George Lyman, a successful second chance.

People who have done everything right have still met with financial ruin just as surely as others have, through no effort on their part, succeeded wildly.

So what do we do? We do the best we can. We work hard and we take reasonable risks. Some of the things we do will work, some won’t. We’ll make stupid mistakes, often more than once and on occasion we’ll get lucky. The financial road will never provide a smooth ride.

It’s a good bet that we will have tough times ahead and an even better bet that we’ll find a way to get through them.

While there is no guarantee it is prudent to have a plan. Chances are you won’t get to where you want to go if you don’t know where you’re headed. But you can’t stop the trip just because you get off track once in a while. You must continue.

Perhaps the most important financial lesson is to learn that money, while important, is not everything. We all know of stories of the miserable miser who died with money but nothing in the way of friends or happiness. And we’ve seen stories of people with little financial assets who amassed a great fortune in terms of love and spirit. But please be aware that there are many people who are rich and happy as well as those who are miserable and poor.

Money, again, is important but it is not the determining factor in true wealth. So when you get in debt make a plan to get out and stick to it. Let go of your past mistakes. Forgive yourself and forgive others who may have played a part in your debt.

The original Lord’s Prayer said, “Forgive us our debts as those who are in debt to us.”

Build your true wealth from the inside out. Be true to yourself and help others when you can. Learn to enjoy the experiences that come freely with life, embrace the people and natural beauty that surrounds you. When you do you will find that money takes it proper place. It will ebb and flow but the true wealth that is you is eternal.


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Debt Calculator

See how long it will take for your debt to get paid off with one of these four options. We have listed a standard debt amount as a default on the debt calculator. You will need to enter your current personal or business debt amount below to see what your debt payoff amounts will reflect.

What's Best For You: Minimum Payments?

Debt Consolidation?

Credit Counseling? Debt Settlement?
Total Unsecured Debt $30,000.00 $30,000.00 $30,000.00 $30,000.00
Months To
Get Out Of Debt
430 60 60 36
Interest Rate 18.9 % 12 % 10-12% Ave None
Total Interest Paid $49,978.53 $10,040.01 $21,300.00 None
$900.00 $667.33 $855.00 $458.33
Total Cost
To Be Debt Free
$79,978.53 $40,040.01 $51,300.00 $16,500.00
Monthly Payments   Months To Get Out Of Debt   Total Cost To Be Debt Free
Minimum Payments Debt Consolidation Credit Counseling Debt Settlement
Enter Your Debt Information Here:
Your Total
Unsecured Debt:
Your Average
Interest Rate:
Months To
Be Debt Free:


PLEASE NOTE: This calculator gives you an estimate of how much it will cost you to get out of debt, how long it will take and how much your monthly payment may be with the different options to pay off your debt. Keep in mind "Minimum Payments" assumes you NEVER make any further purchases on your credit cards and the credit card companies NEVER raise the interest rate on your cards in the future from the rate calculated above. The "Debt Consolidation Loan" example is usually only possible when taking out an "equity line of credit" or "second mortgage", which involves securing your unsecured debt with your home. This is a very risky option for most people because the home could be foreclosed if you cannot make the payments.