Bankruptcy Rise Fuels Demand for Counseling.

Never did that old saying "Knowledge is power" ring truer than now when borrowers and lenders alike are reviewing past mistakes and future opportunities.

The mortgage crisis is in full swing. In March 2008 alone, Consolidated Credit Counseling Services Inc. reported the number of personal bankruptcies, or Chapter 7 bankruptcies where all debt is liquidated, increased by 36% compared to March 2007. It also means higher consumer debt levels "since they are consistent with the number of bankruptcy filings, CCCS said. The total non-business filings for the 12-month period ending March 31, 2008 reached 871,186 with Alabama, Georgia and Indiana topping the chart as the highest bankruptcy states.

According to CCCS debt analyst Howard Dvorkin, who founded the nonprofit, "The unprecedented level of debt poses a serious risk to the financial health of Americans. A high level of indebtedness could lead to increased delinquencies and even more bankruptcies in our already shaky economy."

The infamous culprit at the root of the bigger adjustable-rate mortgage loan reset problem, which will continue to contribute to new personal bankruptcies, adds to "the simple fact that people are extended more credit than they can handle," he said. "Many American's are living on the financial edge, then something happens: divorce, accident, job loss, and the trouble starts."

The obvious response for borrowers - and responsible lenders willing to help their clients - is to ensure those facing financial distress sign up with debt counselors, sooner rather than later. For example, CCCS counselors suggest borrowers call their creditors before it is too late for creditors to be able to help since, as a rule, most are willing to take into consideration special circumstances such as a job loss, divorce, or illness - all of which qualify as temporary, reversible distress. Borrowers can be encouraged to budget their expenses and use only cash and stop incurring new credit ...