No city has been harder hit by the continuous deindustrialization that has plagued the Midwest, since at least the early 80s, than Detroit. Once referred to as The Paris of the West, Detroit has fallen from a peak population of nearly 2,000,000 in the early 1950s to barely a third of that today. The city, which once boasted some of the finest housing stock in the country, has fallen into decay, with entire blocks dominated by collapsing, burnt out shells of what were once the prized homes of hardworking residents. It’s often said that the sheer magnitude of Detroit’s devastation wrought by the hollowing out of an entire urban center cannot be appreciated without seeing it with one’s own eyes. In this author’s opinion, that contention is true.
Unlike what is the case with many other cities, there is little optimistic to say about Detroit’s economic position or its hope for the future. Despite a nominally low unemployment rate, Detroit’s economic center is all but lost. With as many as 40% of its residents below the poverty line, Detroit’s unemployment numbers are not so much an accurate reflection of the state of its labor force as an effort to draw eyes away from the fact that, for practical purposes, there is no economy to speak of. With a majority of its residents on some form of welfare, Detroit has fallen into a state hardly distinguishable from the most wretched scenes of the third-world.
Unsurprisingly, the city has high rates of bankruptcy. In fact, so bad is its plight, the city itself declared bankruptcy in 2013. In an unprecedented move for a major metropolis, the city sought protection from its creditors, who mostly consisted of ex-city employees collecting pensions.
Unfortunately for major cities, when total, deep insolvency is reached through exploitation and mismanagement, bankruptcy is the only option. Luckily, Detroit’s citizens have other options that may allow them to fare much better than the city itself.
Debt consolidation and who it can help
If an individual debtor who still has decent income recognizes and feels he can correct the underlying problems that led to his accumulation of unsecured debt, consolidation of his debts can potentially solve his problems. But the two key factors that make debt consolidation work need to be emphasized.
First, the debtor must have income which, relative to his total debt, would allow him to reasonably pay down the debt within a workable time frame. How long that time frame should be is debatable. But as a rule, if the debt cannot be paid off entirely within three to five years following the consolidation, other options will probably be better.
Second, the underlying habits or incidents which led to incurring the debt must be addressed and corrected. There is no point in fixing the symptoms if the disease persists. A trained credit counselor can help someone who needs guidance on how to put together a written budget and stick with it, in order to avoid recurring debt.
For people who fit these criteria, debt consolidation may be able to save tens of thousands of dollars and even accomplish some of the same goals as declaring bankruptcy. For example, with a professional debt consolidation company, it will often be possible to reduce or even eliminate some aspects of outstanding debts.
However, it should also be noted that debt consolidation is mainly a tool for addressing unsecured debt, that is, debt which is not guaranteed by collateral such as real property, cars or financial assets. Typically, debt consolidation cannot be used to reduce payments or interest rates on home mortgages or auto loans.
Also, debt consolidation can almost never be used to reduce debts owed directly to the state or federal government. Things such as alimony, child support, back taxes or student loans cannot be dispensed by any private company and, usually, cannot even be gotten rid of by way of declaring bankruptcy.
Even though debt consolidation is a fantastic means by which many debtors can achieve serious reductions in monthly payments, interest rates and even principal amounts, sometimes the best option will still be bankruptcy. If you have questions about what option is best for you, it’s always a good idea to contact a trained credit counselor.
But it’s also worth remembering that debt consolidation has helped millions of Americans get out of debt and stay there.